Md. Investor Sues NASDAQ Over Facebook Stock Trades

BALTIMORE (WJZ) -- The frenzy over Facebook stock is giving Wall Street another black eye and a Maryland investor is making worldwide headlines with a new lawsuit.

Mike Hellgren has the growing outrage.

The breathless buildup over Facebook's initial public stock offering has turned to heartache on Wall Street with a flurry of lawsuits.

"This really was grabbing defeat from the jaws of victory," said economist Anirban Basu.

There are allegations analysts at Morgan Stanley and other lead banks holding the deal privately told only their biggest customers that Facebook wasn't going to earn as much as originally thought. Now Maryland investor Phillip Goldberg is suing NASDAQ, claiming trading on May 17 and 18 was such a mess that orders to sell were taking too long to process as Facebook's price fell.

Goldberg wrote in his federal lawsuit, "Orders placed by investors seeking to purchase Facebook shares during the first trading day often took hours to execute. In the meantime, the investors seeking to purchase those shares had no idea if their trades had executed and, accordingly, had no idea if they owned Facebook shares at all."

He says he tried to cancel at $41 per share but it took hours for the order to go through and by that time, it was down to $38. He wants class action status, claiming as many as 30 million shares were affected.

It's already turned off some regular investors in Maryland.

"Simply said, the losses are still in the making," said accountant Mel Budo.

In turn, some say it builds distrust of Wall Street, whose reputation is still healing from the financial crisis of 2008.

"This was supposed to be the change to restore the public's faith in the public markets and in Wall Street and instead, it's been a reminder of everything people suspected, feared and hated about the public markets and Wall Street," said Max Wolff, an economist and senior analyst with Greencrest Capital.

The controversy could lead to an overhaul of regulations for initial public stock offerings.