The part that is most striking to me is that share price and a company's intrinsic value are seemingly in different galaxies. This guy is talking about decisions based on hype. I'm floored. Do these guys really trade based on public opinion?
You can vilify hedge funds till kingdom come, but it sounds here that this guy played by the rules and lost due to a circumstance that he didn't believe was fair.
If the opposite happened (price spiked) yet the same technology problems happened, you'd have a bunch of people complaining that they were over or under filled.
The complaints would not be justified if there was no confusion on his position.
Hedge fund places order. NASDAQ returns an order id.
Did that order show up in the market data feed?
Did they see that order get hit on the market data side?
Did they get an order accept?
Did they try to cancel?
What happened when they tried to cancel?
What actually happened? Did the orders really just get accepted and then go into a black hole?
I like this analogy. You want to play the market, fine. But if NASDAQ breaks, is that really part of the game?
Having had something similar happen to me, I know how much it sucks. You accept its a possibility, but don't really believe it will happen until it does.
EBay's an open market with buyers and sellers and people just take it for granted they'll get screwed by EBay/PayPal at some point in their lives. I understand that there is probably more at stake in the NASDAQ than on EBay, but their Risk/Compliance department should have advised the principles of his fund to hold some capital off to the side for a situation like this.
Casinos can say "technical error!", but there is an advocate for the player in this situation. Usually. (Avoid Indian casinos in the USA for this reason).
What I remeber from the VW stock story happened back then was the following. Porsche tried to take over VW, so they bought every stock they could. Hedge funds bet on falling values and sold VW stock short. Since Porsche continued buying, stock prices raised. Then the hedge funds had to buy the stock short selled, values raised further (up to 1k € if I remeber well). The result were funds obliged to buy stock for almost 1K they sold earlier for a fracture of that.
And after that they sued Porsche for stock manipulation. Yes, these guys are funny. And yes, that FBs IPO stumbled over a computer system is ironic!
What is the stock market if not a giant popularity contest? Real investors make deals with companies, stock buyers are just hoping to catch the right wave.