UBS Cites Nasdaq’s Facebook IPO Snafu for Disappointing 2Q Results

Swiss banking giant UBS issued its second-quarter earnings late Tuesday, posting an almost 50 percent slide in earnings which it blamed on losses of around $350 million in the ill-fated Facebook IPO during the period. Facebook shares began trading on the Nasdaq mid-May at a price tag of $38, but trading had to be halted over a glitch in the Nasdaq’s servers, costing hundreds of millions of dollars in losses for the IPO’s underwriters and some investors. As a result, the bank said it will take legal action against the Nasdaq to recover at least part of its losses.

In the three months through June, UBS said it earned $436 million, or roughly half of its $848 million profit from the first quarter. In addition to the Facebook debacle, the bottom line also took a hit from higher expenses incurred by rising litigation costs and marketing expenses. The hardest hit segment at UBS, predictably, was its equity trading unit, which only generated $250 million in revenue after producing at least $1 billion in revenue in both last year’s second quarter and the first three months of this year.

UBS claims that the Nasdaaq double-filled many of its orders for shares, leaving the bank with far more shares than its clients had ordered and mounting losses as the shares plunged from their initial price. The Nasdaq has said it was setting aside funds to reimburse those affected by its trading problems surrounding the Facebook IPO. But, at just $62 million, the fund wouldn’t even come close to covering the loss claimed by UBS alone.