Sunday, June 10, 2012

CNBC connects the UBS facebook dots

This post originally appeared last week on my tumblr.

Another Economic Uh-oh (courtesy Facebook)

"...cross ourselves and weigh anchor; I mean, embark and cut the moorings by which the bark is held;" ~ Don Quixote

With its moorings cut, the economy wanders uncharted financial seas. Facebook, like a huge piece of Japanese junk earthquake debris, seemed to have been on course for collision. And now we have more proof. The questions being, "is the collision unavoidable? Has it happened already and we just haven't yet felt the punch?" As I sit here, chomping down my hot-dog dinner, I can't help but wonder what beast has been unleashed, and if it was deliberately calculated by the enemy within, to bludgeon and conquer America's economic backbone.

The messenger of the latest round of bad news is CNBC, which, citing unidentified sources, informs us that Swiss bank UBS is "sitting on losses that could be as high as $350 million stemming from its investment in the Facebook initial public offering."

According to the cable network, The issue has to do with the failure to get confirmations and executions from the Facebook trade. CNBC's sources say UBS originally wanted 1 million shares of the social network, but when it did not receive confirmations, it repeated the order multiple times and was left with much more than it intended.

Sounds like something I did recently - I was trying to order an item online, but the checkout page kept saying my credit card information was invalid. However, every time I clicked, my credit card took a dollar amount hit. And i was left with much more than I intended. I empathize with UBS on that particular point.

UBS was not part of the deal, CNBC says, to take Facebook public. Meanwhile, Nasdaq is having discussions with all of the major banks and wholesalers on liability issues. Nasdaq CEO Robert Greifeld told CNBC that the company had been "embarrassed" by the botched Facebook IPO.

USB deployed "duck and cover" tactics via explaining, in writing ::: "Given the size of our U.S. equity business and our role as a major market maker, UBS was affected by these issues, as we believe other market participants may have been... Consistent with our policy on market comments on our positions or intra-quarter performance, we are not disclosing the amount of the loss, which is not material to UBS... We are continuing to consider avenues to recover our losses in this matter, but have not yet taken legal action." Don't you just adore cleverly crafted explanations? I do!

CNBC hints that UBS's market-making arm is down as much as USD$35 million, and UBS is preparing a lawsuit against Nasdaq.

UBS isn't the only player that got "Zuckered in" ::: Knight Capital Group has disclosed a $30-$35 million loss and reports have also touched on losses at Citadel and Citigroup. (See “Facebook Fallout: Knight Says It Lost Millions On IPO, Blames Nasdaq.”) Ah, yes - the old "blame game."
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