alt Hacker NewsPlease explain to me why my "naive and maybe ignorant" understanding of this is wrong... The bigger the IPO price, the more they earn and the more probability is for you to loose money invested in it.
So say Anthropic, or OpenAi, or smartGummyBearsAI go IPO and the price is insanely high... and then spirals down to be 10% of the real price... they earn a lot of money and the public loose a lot of money.
IF smartGummyBearsAI goes 100% realistic price and you buy near the correct price, they earn their fair money and people get an investment.
IF smartGummyBearsAI says that they have technology to use the same machine that makes gummy bears print gpus and they are priced 10,000x their actual price the society just transfers a lot of wealth to them and they scam the society.
Why shouldn't we regulate and aim for the correct price?
Remember 801k money is what we are talking about
The price isn't "set" from what I understand. The price is determined based on what institutional investors are willing to sign up to pay for it. So it's largely driven by the market (not on the actual stock market, just the market of interested parties pre-IPO). Those institutional investors do not want the scenario you describe any more than you or I do.
That's why it's dropping here. When the actual stock market tanked yesterday institutional investors were like - hey wait a minute this is starting to look too expensive.
Also if your 401(k) is in index funds you are safe. A company is not added to indices right away. If you are in actively managed funds or something like that you might have more exposure risk.