[disillusioned]

Because nothing about the IPO price has any resemblance to a fair market valuation, and if it's being propped up by this forced inclusion, even less so? The rules existed to fundamentally protect against a Potemkin village situation where an underwriter and some early round investors whip the valuation into a froth and raise against a rabid corps of retail investors who don't necessarily care about a PE ratio of 1,000+ because they're buying the hype.

More importantly, it allowed organic price discovery to occur. This eschews that process because the indexes are _forced_ to participate essentially at _any_ price, so rather than the market writ large having the opportunity to reward or punish the underwriter pricing of the IPO and determine any true idea of price, they're forced to buy the banker's narrative, which will intrinsically prop up the stock to some degree, but at what cost, and based on what underlying?

[eru]

You know that short selling is possible? And index funds are traditionally some of the keenest participants to lend their shares out to short sellers in return for a bit of extra return (over the raw index).

[HWR_14]

Can you short a company that quickly after it's IPO? I thought there was a period when that was impossible.

[mlyons1340]

Short the index to short the IPO by proxy is what eru is saying.

[eru]

Sorry, that's not what I was saying.

As far as I can tell, there's no minimum period you have to wait after an IPO to be able to short shares. Legally, you can do it from day one.

And instead of a classic short where you have to borrow the stock, you can also write single stock futures. Futures don't require you to borrow the underlying. You just need enough collateral, but that can be anything, like T-bills or whatever.

Or you can write call options, or buy put options, to bet on a falling stock price.