Facebook Inc’s initial public offering (IPO), plagued by trading errors and a share price drop of 16 percent, will push more individual investors out of a stock market that they already distrust after the financial crisis.
“This is clearly the latest in a long string of events that is eviscerating the confidence investors have in the market,” said Andrew Stoltmann, a Chicago attorney who represents retail investors. “The perception is Wall Street jiggered this IPO so the underwriters made money, Facebook executives made money and the small investor got left holding the bag.”
Individual buyers’ willingness to venture into stocks was undercut by difficulties in executing trades on the first day of trading on May 18, Facebook’s subsequent decline and questions as to whether the firm and underwriters selectively disclosed material and non-public information.
“If you have a lot of angry people out there, they’re going to express their anger in different ways,” said Steve Sosnick, equity risk manager for Timber Hill LLC, the market-making unit of Connecticut-based Interactive Brokers Group Inc. “One of them may be with their feet.”
The IPO produced the worst five-day return among the largest US deals of the past decade. The 13 percent decline through Thursday exceeded the 10 percent drop by MF Global Holdings Inc in its first five sessions. Visa Inc did best among the biggest deals, rising 45 percent.
Patricia Arroyo, 53, a psychologist and executive coach in Boston who manages her own investments, said: “What shakes my investor confidence more than the glitches is to see all the institutional investors, insiders and favored clients get all the advantages in these situations.”
After Facebook said on May 9 that growth in advertising had failed to keep up with user gains, analysts at some banks underwriting the deal cut their earnings estimates, people familiar with the process said. The new estimates were relayed to institutional investors.
US Federal securities regulators and the US Senate’s banking committee have said they will or may review the Facebook offering. Buyers of the stock have sued Facebook, the sale’s underwriters and NASDAQ OMX Group Inc, the exchange handling the listing. New York-based NASDAQ was overwhelmed by order cancelations and trade confirmations were delayed on the first day of trading.
Brokerages whose customers had trouble executing Facebook trades, including Boston-based Fidelity Investments and Charles Schwab Corp, said they are trying to resolve complaints.
“Fidelity senior management has been working with regulators, market makers and NASDAQ to represent all of our customers’ trading issues from May 18 and we will continue to do so in order to persuade NASDAQ to mitigate the impact on our customers,” Stephen Austin, a spokesman at Fidelity, said in a phone interview.
Despite trading problems and losses, many investors who have already purchased the stock are continuing to hold on, said John Dominic, vice president of trading for TradeKing, an online broker based in Fort Lauderdale, Florida.
“Most are probably taking a wait-and-see approach,” Dominic said.
Mercuries Life Insurance Co (三商美邦人壽) shares surged to a seven-month high this week after local media reported that E.Sun Financial Holding Co (玉山金控) had outbid CTBC Financial Holding Co (中信金控) in the financially strained insurer’s ongoing sale process. Shares of the mid-sized life insurer climbed 5.8 percent this week to NT$6.72, extending a nearly 18 percent rally over the past month, as investors bet on the likelihood of an impending takeover. The final round of bidding closed on Thursday, marking a critical step in the 32-year-old insurer’s search for a buyer after years of struggling to meet capital adequacy requirements. Local media reports
US sports leagues rushed to get in on the multi-billion US dollar bonanza of legalized betting, but the arrest of an National Basketball Association (NBA) coach and player in two sprawling US federal investigations show the potential cost of partnering with the gambling industry. Portland Trail Blazers coach Chauncey Billups, a former Detroit Pistons star and an NBA Hall of Famer, was arrested for his alleged role in rigged illegal poker games that prosecutors say were tied to Mafia crime families. Miami Heat guard Terry Rozier was charged with manipulating his play for the benefit of bettors and former NBA player and
The DBS Foundation yesterday announced the launch of two flagship programs, “Silver Motion” and “Happier Caregiver, Healthier Seniors,” in partnership with CCILU Ltd, Hondao Senior Citizens’ Welfare Foundation and the Garden of Hope Foundation to help Taiwan face the challenges of a rapidly aging population. The foundation said it would invest S$4.91 million (US$3.8 million) over three years to foster inclusion and resilience in an aging society. “Aging may bring challenges, but it also brings opportunities. With many Asian markets rapidly becoming super-aged, the DBS Foundation is working with a regional ecosystem of like-minded partners across the private, public and people sectors
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