'The curse of Facebook' leaves UBS counting the cost of float
Wednesday 01 August 2012
The curse of Facebook's flotation has struck again as Swiss banking giant UBS yesterday said it lost Sfr349m (£227m) on the social media website's disastrous debut.
Its investment banking arm slumped to a shock, pre-tax quarterly loss of Sfr130m and it pinned the blame on US stock-market index Nasdaq for its "gross mishandling" of the float in May.
UBS lost so much because there was a delay when Nasdaq processed its purchase of Facebook shares on the first day's trading, meaning requests were made "multiple times" and the bank claimed it was left with "far more shares than our clients had ordered". The Swiss firm is now suing Nasdaq for compensation to cover "the full extent" of its losses.
"UBS's loss resulted from Nasdaq multiple failures to carry out its obligations, including both opening the Facebook stock for trading and not halting trading in the stock during the day," said UBS.
Losses have got worse because shares in Facebook – founded by Mark Zuckerberg – have kept falling since their debut, plummeting from an initial price of $38 to $23 this week.
The fiasco was particularly embarrassing for UBS because it said that many rich, private clients from its wealth-management business placed "significant orders" of Facebook stock.
UBS has been battling to restore its reputation after writing off well over £20m on poor investments such as subprime mortgages in the credit crunch after 2007.
Despite the Facebook woes and "challenging" trading in investment banking, UBS still made group, pre-tax profits of Sfr951m during the quarter – against Sfr1.3bn in the first three months of this year.
UBS has been focusing on less risky income from wealth management and private banking, with net inflows of Sfr13bn in the quarter.
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