Citigroup Blasts Nasdaq Over Facebook I.P.O.

Citigroup is not happy with Nasdaq's response to Facebook's ill-fated initial public offering.

In a 17-page letter sent to the Securities and Exchange Commission on Wednesday, the bank slammed Nasdaq for its “mishandling” of the I.P.O. and its compensation offer. Citigroup said that Nasdaq's $62 million proposal would only cover “fraction of its total losses.”

“Nasdaq was grossly negligent in its handling of the Facebook I.P.O., and as such, Citi should be entitled to recover all of its losses attributable to Nasdaq's gross negligence, not just a very small fraction as is currently the case,” the firm said in its letter.

Citigroup and other been big investors have been increasingly critical of Nasdaq since Facebook went public in May.

The stock got off to a troubled start, after Nasdaq delayed the opening of trading and botched orders. Shares of Facebook closed that day at just above $38, roughly where they started.

Citigroup has l ost about $20 million related to the I.P.O., according to two people with knowledge of the matter. UBS reported a $356 million loss. And Knight Capital, which has suffered its own missteps in recent weeks, lost $35.4 million.

To make up for their losses, Nasdaq initially offered $40 million. But it soon upsized that to $62 million amid protests from its clients.

Not every financial firm that suffered losses in Facebook's I.P.O. is eager to fight Nasdaq. On Tuesday, Citadel, in a separate letter to the S.E.C., asked the agency to approve Nasdaq's proposal, calling it “objective and fair.”

But Citigroup, in its letter, outlined a lengthy list of grievances against Nasdaq.

It took the exchange to task for not testing its systems thoroughly and failing to properly disclose the problems on the morning of the I.P.O. The letter, which was previously reported by the Wall Street Journal, claimed that ” market participants' losses were not caused by a sys tem glitch” but rather “grossly negligent, self-serving business decisions.”

“This is the first time we have chosen to comment publicly,” Dan Keegan, Citigroup's Global Head of Cash Equities said in an interview on Wednesday night. “We have tried to allow Nasdaq the time to do what we believe to be right. Unfortunately, to date, we do not believe that they have done so, hence the need to articulate Citi's position.”

A spokesperson for Nasdaq declined to comment.