Facebook Ties
Currently Facebook and its IPO handlers are the targets of about 50 different lawsuits for its haphazard initial public offering that occurred on May 18th, 2012. Mainly NASDAQ, Morgan Stanley, and Facebook itself are all coming under fire for a series of problems that occurred on this day, such as NASDAQ’s system malfunctioning for the first hours of trading, Morgan Stanley’s supposedly giving misleading numbers to investors, and Facebook’s leaking of information before the actual IPO date. These miscommunications through these investors’ and traders’ network were fed mostly through the effects of strong and weak ties.
Consider Morgan Stanley’s position in this debacle. The main accusations against this company was that they passed along higher projections for Facebook’s IPO as well as did not alert Facebook’s potential decrease in worth because of the effects of the switch from computer to mobile use. However, such information is not required to be made public—it was passed along to major bodies but not to retail and private investors. Morgan Stanley has no strong tie to these private investors. The law forces them to have strong ties with larger, public institutions so that information can thus be conveyed, but with weak ties that information may never reach the other end.
In this network, NASDAQ has a very powerful position as it is the company that facilitates the actual trading of stocks. It has strong ties to almost all players involved because it is the main node through which other nodes are connected and through which information and stocks can flow. Therefore, since NASDAQ was not directing traffic correctly it misdirected information to and from all the other nodes involved. During this time it actually ended up misplacing numerous trades, totaling at a value of tens of millions of dollars.
The importance of these players in the network of stock exchange needs to be understood by all parties involved in order to avoid any future similar catastrophes. NASDAQ admits to its own mistakes as highly destructive because of the strength of its ties with virtually all other nodes, so it has agreed to pay $62 million in damages. The transmission of information throughout the network must always be functional for especially its strong ties.
http://online.wsj.com/article/SB10000872396390444083304578018761378016032.html?mod=WSJ_hp_EditorsPicks
– NK