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>If the price then drops (because the initial offering price was too high) those preferred clients lose money. Unless these preferred clients are active trader
by pizzazzaro 7y ago
>If the price then drops (because the initial offering price was too high) those preferred clients lose money.
Unless these preferred clients are active traders, this isnt a problem. Remember when government nixed fiduciary resposibility?
Just slide a soon-to-drop, over-valued-at-IPO stock into say,... someones' retirement account? Wouldnt it be weird if a bunch or Morgan-Stanley-managed 401Ks were shifted to include that?
Especially if the bank managing the IPO gets a cut of the cash, there's no downside to such. At least for them.
- josh5555 7y agoI don't think you understand how 401ks work. First, Morgan Stanley probably doesn't manager people's 401k allocations, the employees must choose their investments. Second, most 401ks only allow mutual funds, not single stocks. The fiduciary rule is not in effect but the suitability rule is. You can't give someone unsuitable investments or you face lawsuits and fines. IPOs are very restricted to who can participate. There is a lot of naughty business in the financial industry, but the industry does serve a real and necessary purpose. Businesses need ways to raise capital, etc. Investors need a place to save money for retirement. It isn't all evil.