SAN FRANCISCO -- With the word "botched" now permanently affixed to the phrase "Facebook IPO," the chief executive of Nasdaq came to Silicon Valley on Tuesday hoping to repair the stock exchange's reputation.
In an exclusive interview, Robert Greifeld offered both a mea culpa for the technical glitches that helped mar the decade's most anticipated stock offering and an argument that the landscape for initial public stock offerings remains verdant.
"Clearly, this was a low point for us," the 53-year-old said. "We have to get better as a company, and we will."
Some critics, though, are still shaking their heads that Greifeld was out of contact for five hours after the Facebook glitch, which has made his exchange the target of lawsuits seeking hundreds of millions of dollars.
And they question Greifeld's rosy picture of the IPO pipeline, given Facebook's flat performance.
"I think he will be lucky to keep his job through the end of the year," said Andrew Stoltmann, a securities lawyer in Chicago.
To be sure, there's been plenty of blame to go around in the epic fail of what was supposed to be a milestone for Web 2.0 companies.
Facebook itself, in the days before the IPO, hiked both the price of the offering and the number of shares being sold, which inflated supply and tamped down demand.
And federal regulators are among those questioning whether Facebook and lead underwriter Morgan Stanley misled small investors into buying high while telling select institutional buyers that the shares were overvalued.
Still, the problems with the offering began with the unexpected hiccup in Nasdaq's automated trading systems. Many say the delays and confusion helped suck enthusiasm for the offering and prompt a rush of later-morning selling.
The morning of May 18 started off well for Greifeld, a burly former marathoner who's run the Nasdaq for nine years. His smiling image was broadcast worldwide as Facebook CEO Mark Zuckerberg ceremonially rang the exchange's opening bell at the social network's Menlo Park headquarters.
But Greifeld said exchange officials shortly afterward realized that there were problems with an automated auction program set up to give buyers and sellers equal footing. The system, called an "IPO cross," had originally been designed to stop order modifications two minutes before a stock opens, but Nasdaq — citing customer demands — later tweaked it to allow cancellations to be sent into the program as they happen.
"The assumption was," Greifeld said in his heavy New York accent, "that the action would run so fast a cancellation would have little chance to affect things." The software has handled 450 stock offerings since its rollout in 2007.
But given the size of Facebook's offering -- 421 million shares -- and the heavy demand among retail investors, the auction software couldn't catch up with the rush of last-second trade modifications.
After an agonizing 30-minute delay, Nasdaq officials switched the Facebook offering to a different auction system. Greifeld headed to the airport thinking the problem had been solved. He spent the next five hours on a commercial jet to Manhattan without Internet access.
Yet while switching to the backup system allowed the shares to begin trading, it created a second problem. The backup system couldn't match a few million of those shares to buyers or sellers, so Nasdaq officials had to enlist a broker to sell them.
That took two hours, during which some traders had no idea whether their orders for Facebook had been filled.
Several experts interviewed for this story sounded a note of sympathy for Nasdaq. Nasdaq has already put up $40 million to help resolve such claims — an unprecedented amount that still awaits approval by the Securities and Exchange Commission. And Stoltmann, the securities lawyer, thinks investment firms have little chance of collecting damages in court, given the legal protections afforded stock exchanges.
Greifeld, meanwhile, is looking ahead even as he works to soothe angry clients. He called Nasdaq's IPO pipeline "very robust," with half of the 200 companies that have filed to go public on U.S. exchanges planning to do so on the exchange.
But Rob Steinberg, a Los Angeles securities lawyer with Jeffers, Mangel, Butler & Mitchell, predicts Facebook fallout will have a chilling effect on IPOs in the near term.
Underwriters are going to be loath to take companies public at soaring valuations, he said, which will likely prompt strong companies to wait until the markets seem more receptive.
"I don't see good companies going," Steinberg said, "even if they're already in the pipeline."
Contact Peter Delevett at 408-271-3638 or firstname.lastname@example.org. Follow him at Twitter.com/mercwiretap.