Nasdaq takes hit with Facebook IPO

Nasdaq OMX would no doubt, face immediate consequences of the botched handling of Facebook shares on the first day of trading of the social network but the longer term repercussions could be much graver, according to analysts.

The exchange, initially said it planned to set aside $13 million to resolve bad trades, and even if all of that was used, the cost would be minimal as against the $387 million in net income it reported last year.

Analysts said Nasdaq's business would likely take a bigger hit from the damage done to its reputation by the reverse. Nasdaq also failed on Friday to return order confirmations to some investors for hours, with system problems stalling up trading by 30 minutes.

The problems added to investor anxiety about Facebook and the uncertainty about retail investors getting shares, helping to turn a hoped for bonanza with a 10 per cent rise into a fizzle with a rise of less than 1 per cent uptick. Some brokers reported yesterday that they were still awaiting order confirmations.

IPOs contribute to Nasdaq's US listings business, which notched up $173 million in revenue out of a total $1.69 billion last year, and could be the biggest casualty going forward.

According to former Nasdaq vice chairman David Weild, who is an adviser at Grant Thornton LLP, the exchange may have trouble competing for future "ultra-large" IPOs.

Nasdaq's troubles could spell a huge opportunity for arch rival, the New York Stock Exchange, owned by NYSE Euronext. The recent months have seen the two locked in a fierce battle for new listings and the Facebook IPO, the first US company to go public with a valuation greater than $100 billion, had been seen a major triumph for Nasdaq.