UBS Sustains Reported $350 Million Loss on Facebook IPO

By
Photo: UBS

Remember that character on the Flintstones who had a little personal rain cloud following him around all the time, no matter where he went? What was his name? [Googles.] Bad Luck Schleprock! Yep, that's it.

Anyway, CNBC is reporting today that UBS, the beleaguered Swiss bank, might be the Wall Street version of Bad Luck Schleprock. First, it was hit with a $2.3 billion loss caused by a recently bailed-out-in-the-literal-sense trader named Kweku Adoboli, whose shenanigans forced the resignation of the bank's CEO. Then its stock price began falling, leading to unhappy shareholders and a much-reduced bonus pool.

Now, it looks like the botched Facebook IPO — which UBS wasn't even an underwriter on! — has caused up to $350 million in losses.

CNBC's Maria Bartiromo reports that UBS is preparing legal action against Nasdaq for failing to confirm its trades in Facebook's stock on the glitch-ridden first day of trading. Not having its trades confirmed led the bank to buy many more shares than it had intended — shares it then had to unload at reduced prices when the stock price fell, according to Bartiromo.

At the end of the day, these sources said, Nasdaq should have halted the stock when it was clear that the confirmations were not coming out. Apparently, UBS tried to unload the stock at $35 a share, but could not catch a bid and sold some of the positions under $30 a share. As Facebook shares were dropping, UBS was a big seller, according to these people.

As Felix Salmon points out, the math on UBS's reported losses is a bit sketchy. And those losses, however big, could be hedged somehow, or could shrink if Facebook's stock price improves.

But even if the losses were only a fraction of $350 million, it means that Nasdaq could be on the hook for a lot more than a $40 million apology fund.