Nasdaq to compensate investors for Facebook IPO woes

The Nasdaq stock exchange announced Wednesday that it has set aside $40 million in cash and credit for investors who struggled to make trades in the opening moments of Facebook's initial public offerings.

Investors and firms that tried to deal in the social media stock during the early moments of its May 18 offering were ensnared in technical issues from the stock exchange. Public trading of the stock was delayed for roughly half an hour, as the stock exchange's systems struggled to keep up with the huge influx of trades on the hotly anticipated stock.

In an interview with The Wall Street Journal, Robert Greifeld, chief executive of NASDAQ OMX Group Inc., said the exchange owed the industry "an apology."

The high-profile offering was plagued with problems, and the stock has tumbled nearly 30 percent since it first went public. Congressional banking panels and regulators have said they are looking into the offering for potential problems, and the company's underwriters have come under scrutiny due to reports that news of reduced revenue expectations for Facebook did not make it to all investors before the stock hit the market.

Investors who were unable to complete their deals during the hectic first minutes of public trading, or were unsure of their position amid the confusion, now have the chance to recoup their costs from the exchange. However, investors who lost money on the stock through their own moves are not eligible for compensation, Nasdaq said.

Nonetheless, the move by the exchange represents a substantial break from standard policy, as it typically sets a cap of $3 million on funds set aside to accommodate investors following technical problems. Under the agreement, member firms on the exchange would receive $13.7 million in cash, while the remaining amount would be doled out as forms of credit to members that pay to trade on the exchange.

The stock exchange also announced that it was tapping IBM to conduct a "thorough review" of its systems, although it said the problems of May 18 had been remedied.

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