UBS lost $356m on Facebook’s initial public offering after its stake plunged 39 per cent in value. Swiss bank UBS lost 349m Swiss francs ($356m) due to problems with the launch of Facebook shares, more than halving its profit.
UBS blamed the Nasdaq exchange’s “gross mishandling” of the flotation and said it would be seeking compensation.
It said system problems had left it with more Facebook shares - which have fallen in value- than it had ordered.
UBS’s second quarter profits were $425m Swiss francs ($434m; £276m), compared with 1bn francs a year earlier.
UBS shares were trading 6 per cent lower at 10.26 francs on Tuesday afternoon.
“UBS’s losses on the Facebook shares resulted from Nasdaq’s multiple failures to carry out its obligations, including both opening the Facebook stock for trading and not halting trading in the stock during the day,” the Swiss bank said.
UBS’s pre-market orders were not confirmed until several hours after the stock had started trading.
“Orders were entered multiple times before the necessary confirmations from Nasdaq were received. Nasdaq, ultimately, filled all of these orders, exposing UBS to far more shares than our clients had ordered,” the bank said in its statement.
Facebook was valued at $104bn at its flotation in May, but the shares are now 39% below the initial sale price.
As a result of the Facebook losses, UBS’s investment bank reported a loss in the quarter. That is compared with a profit of 730m Swiss francs a year earlier.
UBS also warned that failure to resolve problems within Europe’s banking system “accentuated by the reduction in market activity levels typically seen in the third quarter” meant its next set of earnings were likely to be flat.
As a result, UBS said it would look at making further cost savings. The Swiss group is already in the process of cutting 3,500 jobs.
The company also said it was on target to meet new Basel III bank rules and would not have to issue new shares to generate additional money.
Its ratio of high quality - tier 1 - capital to lending was 8.8 per cent, just shy of the 9 per cent that will be required from next year.