On the heels of a lingering investigation and class action lawsuit over technical glitches that plagued the fabled Facebook IPO back in 2012, Nasdaq has agreed to a $26.5 million settlement, according to a Reuters report.
The run of the Facebook offering was one of the more chronicled and hyped IPOs in recent memory, which vastly exceeded its initial pricing for investors at the inaugural opening, only to wither shortly after.
As a result of copious technical glitches however, Nasdaq found itself being sued by retail investors who alleged that the exchange was covering up flaws in its technology, failing to adequately test its systems ahead of the social media group’s market debut.
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More specifically, the May 18, 2012 IPO was riddled with technical glitches – including a malfunction in the system’s design for processing order cancellations – that left a number of market makers unsure whether trades were processed.
In total, the technical malfunctions incurred by market makers was estimated at $500 million. Later that year, Nasdaq agreed to a $62 million package in restitution. However, the deal failed to address claims of ordinary retail investors.
According to Vincent Cappucci, one of the lawyers representing retail investors damaged in the IPO, in a statement on the suit, “This is the first case that we are aware of where a class of investors has sued an exchange for market disruption, and the court has sustained those claims.”