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To: Box-By-The-Riviera™ who wrote (95016)	4/17/2001 3:24:02 AM
From: patron_anejo_por_favor	Read Replies (2) \| Respond to of 436258

HO HO HO! Those guys are complete sleazebags. Whoever buys IPO from them deserves what happens next: If you're wondering where Morgan Stanley's allegiances were through all of this, you've hit upon a very good question. The investment bank was wearing enough hats in this deal to raises at least the appearance of several conflicts of interest. As lender to Lucent, it had a vested interest in a deal that would repay that loan by swapping Agere stock for the commercial paper Morgan held — even if that meant that Lucent would take a rock-bottom $6 a share price for one of its crown jewels. But as strategic adviser to Lucent, Morgan might have otherwise counseled against taking such a massive haircut — despite the pressure from the banks. Moreover, as broker to countless institutional and retail clients, Morgan had an obligation to sell stock that had a chance for a strong first-day advance — the kind of pop that would allow them to flip the stock and walk away with a profit. At the very least, brokerage clients should be able to count on a lead underwriter to support a deal if it appears to be going sour in the aftermarket. But it didn't work out that way. Not only did Lucent and Morgan Stanley go ahead with the $6 deal on March 28, but the stock fell like a rock in the open market. It didn't help that Agere warned the Street that very day that it would post a ``significant operating loss'' for fiscal 2001 in the face of declining volumes and customer cancellations. Making matters worse was a side deal for Lucent to pay off $520 million of its commercial-paper obligation to Morgan by issuing an ``over-allotment'' of 90 million shares to the underwriter at $5.75 a share. Known on Wall Street as a ``green shoe,'' such over-allotments are typically reserved for deals that are spread thin among clients. Essentially the sale of more shares than originally contemplated in an IPO, they're supposed to be a ``win-win-win'' situation for all parties involved: Clients get better allocations of a hot deal, the underwriter collects a bigger fee and the issuing company gets to take advantage of a very receptive market to instantly monetize more stock. The Agere IPO hardly fit the bill. Indeed, Morgan sold its 90 million shares for $6 each into the depressed market for Agere, boosting supply of the stock at precisely the wrong time. That drove the price down even further, leaving institutional clients unable to flip the stock. Instead, they found themselves stuck with a troubled telecom issue in a poisonous market.