Citi Files Claim with Nasdaq for Compensation From Facebook IPO: Sources
Citigroup has filed a claim with Nasdaq OMX Group to potentially receive compensation for losses associated with Facebook's glitch-plagued market debut last May, according to two people with knowledge of the situation.
Citi filed the claim on Monday, which is the deadline for applications from firms seeking to participate in the $62 million compensation plan. It is still considering all options, including legal alternatives, one of the people said. They did not have permission to speak with media.
A spokeswoman for Citi had no comment, nor did a spokesman for Nasdaq.
The filing was reported by The Wall Street Journal on Monday.
Citi's market-making arm lost about $20 million in the IPO, a source told Reuters in May. That is just a sliver of the upward of $500 million that market-making firms—which facilitate trades, backing them with their own capital—and brokers lost in the $16 billion IPO, which took place May 18.
UBS has pegged its losses from the problematic offering at more than $350 million. On March 25, it said it had already filed an arbitration demand against Nasdaq to fully recover losses resulting from the exchange's "gross mishandling" of the event.
Citi has been highly critical of Nasdaq's compensation plan, saying in a letter to the Securities and Exchange Commission in August that the exchange operator should be liable for hundreds of millions of dollars more.
Liabilities at U.S. exchanges, which have some regulatory duties, are capped when fulfilling those duties. Nasdaq's cap for technical problems is $3 million a month in most instances.
But Citi argued the New York-based exchange should be fully liable for all the IPO losses because it was operating as a for-profit company during the offering and as such should not receive regulatory immunity.
In its letter, Citi said that Nasdaq made "grossly negligent business decisions that caused market participants hundreds of millions of dollars of losses."