FaceBook: The Complete Forensic Post-Mortem

Tyler Durden's picture

While much has already been written on the topic of peak valuation, social bubbles popping, and the ethical social utility of yesterday's historically overhyped IPO, nobody has done an analysis of the actual stock trading dynamics as in-depth as the following complete forensic post-mortem by Nanex. Because more than anything, those tense 30 minutes between the scheduled open and the actual one (which just happened to coincide with the European close), showed just how reliant any form of public capital raising is on technology and electronic trading. And to think there was a time when an IPO simply allowed a company to raise cash: sadly it has devolved to the point where a public offering is a policy statement in support of a broken capital market, which however is fully in the hands of SkyNet, as yesterday's chain of events, so very humiliating for the Nasdaq, showed. From a delayed opening, to 2 hour trade confirmation delays, virtually everyone was in the dark about what was really happening behind the scenes! As the analysis below shows, what happened was at times sheer chaos, where everything was hanging by a thread, because if FB had gotten the BATS treatment, it was lights out for the stock market. Well, the D-Day was avoided for now, but at what cost? And how much over the greenshoe FaceBook stock overallotment did MS have to buy to prevent it from tumbling below $30 because as Reuters reminds us, "had Morgan Stanley bought all of the shares traded around $38 in the final 20 minutes of the day, it would have spent nearly $2 billion." What about the first defense of $38?  In other words: in order to make some $67 million for its Investment Banking unit, was MS forced to eat a several hundred million loss in its sales and trading division just to avoid looking like the world's worst underwriter ever? We won't know for a while, but in the meantime, here is a visual summary of the key events during yesterday's far less than historic IPO.

May 18 - The Facebook IPO

The first warning sign, was the delay in trading. Here's the status messages from Nasdaq for that day.

The first 4 charts are 5 second interval charts of Facebook showing the first hour and 15 minutes of quotes and trades.

Chart 1. NBBO (National Best Bid or Offer) Spread. Black: bid < ask (normal), Yellow: bid = ask (locked), Red: bid > ask (crossed)all bids and offers color coded by exchange.

Chart 2. Best bids and offers (NBBO) color coded by exchange.

Chart 3. All bids and offers color coded by exchange.

Chart 4. All trades color coded by exchange.

The next 4 images are tick charts showing quotes and trades. How to read these charts

Chart 5. The first seconds of trading.

Chart 6. The first seconds of trading, continued.

Chart 7. Suddenly, a vacuum appears and produces a record 12,285 trades in 1 second.

Chart 8. Same as above, showing just Nasdaq.

The next 2 charts (10 second interval) show how Nasdaq's quote stopped, but trades from Nasdaq did not (direct feeds must have been fine, but not the consolidated).

Chart 9. Nasdaq Bids and Offers along with NBBO.

Chart 10. Nasdaq Trades

The next 2 charts (20 millisecond interval) show the effect when Nasdaq's quote returned. There were two significant gaps in quotes (for all exchanges) and 1 significant gap in trades.
Note how the gap in trades is not at the same time as the gaps in quotes.

Chart 11. All bids and offers color coded by exchange.

Chart 12. All trades color coded by exchange.

The next chart (5 millisecond interval) shows the result of the blast in trades and quotes when Nasdaq's quote returned. Trades printed at least 900 milliseconds before quotes, an impossibility if orders are being routed according to regulations. We have jokingly referred to this anomaly as fantaseconds.

Chart 13. Nasdaq bids and offers (triangles), Nasdaq trades (circles) and NBBO (gray/yellow/red shading).

The next 2 charts (500 millisecond interval) detail the HFT Tractor Beam area where coincidentally or not, Nasdaq quotes began "sputtering" right before stopping for about 2 hours.

Chart 14. NBBO Spread and quote rate from all exchanges.
Note the flat lines at the bottom. Also note how the quote rate (lower panel) surges when prices rise above the flat line, which is what we would expect. However, on Nasdaq (next chart)..

Chart 15. NBBO Spread and quote rate from just Nasdaq.
When prices rise above the flat line, quotes from Nasdaq stop, exactly opposite of expected behavior and what we see from other exchanges at that time (see chart above).


And finally, Nanex on the fallout:

During the FaceBook's failed IPO opening period (11 - 11:30)  and shortly after the trading began, bad prices (spikes) began appearing in other stocks, including symbols APPL, INTU, NFLX, PDCO, QCOM, QLD, UST and ZNGA. They also occurred in Facebook during the first 15 minutes of trading (see Chart 4 on this page). There are likely other stocks that were affected. In nearly all of these cases the price spikes were executing against quotes that were far outside the NBBO. Most of these executions occurred on the CBOE, and a few on Chicago and AMEX. Fortunately, by chance, the prices were not wide enough to trigger circuit breakers in these stocks.

We think these bad price executions are related to whatever issues Nasdaq was having in facebook and probably are from errors in routing software. A similar thing happened during BATS failed IPO in AAPL and other stocks.

Chart 1. AAPL

Chart 2. NFLX

Chart 3. QCOM

Chart 4. QLD

Chart 5. UST

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WhyDoesItHurtWhen iPee's picture

best chart porn all week!

WhyDoesItHurtWhen iPee's picture

they tried to Frackbook up the price, but Failbooked, now they need a Facebag to hide the shame.

Harlequin001's picture

Do I correctly assume then that all HFT's act primarily through the Naz?

francis_sawyer's picture

I feel like the fucking 'Lawnmower Man' reading those charts...

Colombian Gringo's picture

The IPO was grossly overpriced, and so the insiders were dumping everything they could to the hapless idiots on the other side of the trade. The good news is that for once it is the underwriters such as Morgan Stanley who are getting the ratfuck. Couldn't happen to a worse set of criminals.

Roger O. Thornhill's picture

That the underwriter feels some serious pain for foisting this useless turd of of a company on the market is not a problem with me.

The 'market' has literally become madness at this point. The simple idea of "asset creation" is lost now. What real asset does facebook create, what utility? It has a certain value, it is a form of entertainment for lonely, narcisstic people, but it is way over hyped. 

As a site it has a certain voyeuristic and twisted quality, which for most socially normal people falls off fairly quickly. As a privacy destroyer it has succeeded handsomely! Facebook's overreach is what will ultimately kill it.

For now I let it linger around like an old rolodex. That is its only possible utility. I don't care if anyone just made dinner, or is tired, or just farted. I don't think any but a small, sick demographic will care either. And over time there is no way to justify a large cap for such uselessness.



The Big Ching-aso's picture



FaceGag.   U gotta have a harry pair 2 put an ugly mug out there 4 the world to flee.

franzpick's picture

Let's Face-It, history repeats itself, the first time as tragedy, the second time as farce, and this IPO will soon or eventually be recognized as a repeat of the 1637 Dutch tulip mania, or the South Sea or Mississippi bubbles of the 1700s.  Hard to believe that in the 4th year of a collapse of the 30 year-plus fed/bank/gov't sponsored worldwide credit binge, we are still selling and buying such delusional financial fantasies:


franzpick's picture

Wouldn't surprise me if, during an impending Euro/world debt-equity collapse, there arose calls for a PhaseBook sellers profit ClawBack.

Badabing's picture

The lie can’t be hidden in physical reality.

Farcebook closed after its first day of trading flat, or did it?

If priced in gold or silver for the day FB took a loss!

In an ocean of floating currencies PM’s are an island.

flacon's picture

Short the financial sector. Make money. Use the profits to buy more silver. 

Cdad's picture

Tip of the hat, Roger O.  Simply because that was very well said.

Mr Poopra's picture

Should be an interesting Monday, gentlemen.  I'll be watching the collapse with a cannabis cigar.  Maybe some scotch if my unemployed cousin did not drink it all.  Great times!

valley chick's picture

Not so fast Mr Poopra...saw in Reuters that at the G-8 meeting it was mentioned about more "US style stimulus.  Should be "good" news for the market. :(

Freddie's picture

Cannabis?  It causes cancer like F*gBook.

oldman's picture


Of course, you're just kidding

like the joke about 'secondary smoke'

And not a word about gasoline fumes

And so many others

But I like a guy with a sense of humor

Bring us some more                                  thanks        om

garypaul's picture

Well I don't like gasoline fumes either but that doesn't make doubling the carcinogens a good idea. The logic of smokers is so tortured. 

Element's picture

Logic applies to math, not to human thought and habit.

Oh regional Indian's picture

Smoking cigarettes is BAD.

Smoking Tobacco is GOOD.

Big difference. Huge difference.


For smokers...see below


Element's picture

And alcohol atrophies your brain, degrades internal organs and damages personal relationships and social interaction ... while the whole universe is full of sub-atomic ionising light and particles that will give you cancer ... on a long enough timeline ... what to do?

potlatch's picture

There are entire rows of the periodic table that frighten me much more than a populace high 24/7 on weed

Goldilocks's picture

Colombian Gringo,


The Smashing Pumpkins-THE WORLD IS A VAMPIRE-1995.mp4
http://www.youtube.com/watch?v=tuCA27RYKqw (4:12)

The Smashing Pumpkins - Bullet with Butterfly Wings
http://www.youtube.com/watch?v=8-r-V0uK4u0 (4:27)

mendigo's picture

This was a huge success for the FB - to the extent that it is good to royally screw your investors. They hyped it to the max and left nothing on the table but crumbs. Very optimal.
The face-plant is in the near future - there is no way this sucker can fly. Its already smelling a bit ripe.

overbet's picture

My favorite time was when many of us finally got our opening fill confirmations and the stock dropped like a rock over a buck in a second. Its fucking awesome to no be able to cancel your orders, not get confirmation and be long a stock that is tanking and you cant sell because your positions show 0. Good work Bats I mean Nasdaq.

The Big Ching-aso's picture



This could do a reverse split under an inverted head and shoulders and then finish with a triple gainer.

Oh regional Indian's picture


In the end though, it's all about the "entry" eh?


TWSceptic's picture

Thanks for mentioning that film, didn't see it yet and I love flicks like that. Looks like "Limitless" copied it, really enjoyed that one btw.

max2205's picture

I am sure the SEC is spending this weekend pouring over this data.


LOL. Stupid useless fucks!

sunaJ's picture



Narrator: [about the soap] Tyler sold his soap to department stores at $20 a bar. Lord knows what they charged. It was beautiful. We were selling rich women their own fat asses back to them.


Whether you are a user of Facebook (I was a few years ago) or a retail buyer of the stock, you get the sense that you are a rich, fat-ass woman.  Facebook is both a joke as a multi-billion dollar corporation and as a "social" network.

The Big Ching-aso's picture



I don't know what kinda HFT computers they're using but it just goes 2 show U nothing replaces real common cents.

WhyDoesItHurtWhen iPee's picture

  FaceHook, line and sinker,.........Bitchez

The Big Ching-aso's picture



I wonder how many hold this at $38 hoping for a killing at $38.01?

SpeakerFTD's picture

FaceDown, FAZ up, that's the way I like to...um...trade

onarga74's picture

When MS runs out dough proppin this thing up they'll get to choose from Fedbook, Berniebook, Bookenator, TBTFailbook...

vast-dom's picture

so JPM -- uh I mean GS -- puts 2B into last 20mins to float this turd up. At least this 2B actually propped the stock up. Much better than the 2B more at 12B total loss yet to be unwound; or is it? JPM -- uh i mean GS -- will lose 30% or more on July 15 of these billions sunk into this fuckbook charade. 

             --interchangable gov and taxpayer supporter ponzi banks are a blur of names--

Oh regional Indian's picture

Funny that it is actually MS...but right you are. Interchangable. Same root nasty network.

The degree of flagarent violation of law and dignity of every-day people, world over, is really something to behold.

We are all Jose Padilla now.



The Big Ching-aso's picture



AAPL should merge with Facebook and then IPO it again as CRAAPLFace.

The Big Ching-aso's picture



When did you get your's and how many years did it take?

Conrad Murray's picture

Tubgirl probably already has that trademarked.

barliman's picture


Submitted for your consideration:

An aggregation from posts I made yesterday starting at 15:40 and running through market close



Well, currently trading at $ 38.02 and there are 12.3 million bid at $ 38.00 on nadq and 7.7 million bid at $ 38.00 on arca.

Update: 4.4 million bid added at $ 38.00 on ubbs and 1 million added on edgx at $ 38.00

Update: Edgx position taken out - other three total of 25 million now at 21 million and dropping


Word of the day: Asymptotic

Use in a sentence: FB is asymptotically approaching the underwriter's floor price of $ 38.00 through the end of trading today.

Current floor at $ 38.00 is roughly 15 million shares and DROPPING



6 million and dropping.

If this floor gives way, this is going to be a mega-disaster!


Nothing to see here, move along ...

... and with 4 minutes go - somebody threw a lot of "chaff" bids in up to $ 38.30 and the clearing trade rate slowed from 2.5 million/minute to under 1.0 million/minute ...

what a coincidence ...

All multimillion bid positions at $ 38.00 on all exchanges have been cleared on market close.


PUHLEEZE, Tyler ... I'm begging you.

Nanex HAS to have some interesting graphics from their data stream that illustrate this better than my feeble attempts.