Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : America Under Siege: The End of Innocence -- Ignore unavailable to you. Want to Upgrade?

To: Michael Watkins who wrote (5406)	9/27/2001 1:10:35 PM
From: Qone0	Read Replies (1) \| Respond to of 27666

In 1998-2000 we witnessed many "IPOs" race up on opening day to astronmical valuations. By your logic, this was done by "investors" since short selling isn't possible in the US when new issues come to market. I don't think so. Investors? No way. Gamblers perhaps. Return on investment is the ONLY reason that people buy IPO`s. The reason you can`t short an IPO is to lower the risk to the people who bought the IPO that funded the start up of the company. If shorting was allowed on IPO`s that would increase the risk. And greatly lower the amount of capital that would be put toward funding new companies. How do you value a new company that is starting up? Valuations really mean nothing until the company has invested the funds from the IPO in its business and its up and running for a year or so. I have to repeat this comment of yours because its key -- IPO's transfer RISK from the VC's, insiders, and investment bankers to the public. The inside club takes fat gains, risk free, while the public shoulders a disproportionate level of risk, all in the hopes of landing on the next Microsoft. Try as I might to see your point, I can not. Very true that IPO`s transfers risk to the public. That is the entire reason the stock market exsists. The public risks its capital in hopes of a return and thus fuels the economy with new technology, new medical breakthroughs ect. Short selling simply is a means of transfering wealth from the owners of that wealth. To someone who never owned it. As the valuation of the stock becomes higher short selling increases the amount of capital in that companies stock. It decreases liquidity for the owners of the stock to take a profit. Because of the new shares in the market that were not issued by the company. But rather issued by brokerages through their loaning out of long positions to be sold again. That being said. Short Selling is very profitable because you can make money on the down side. Every stock goes up and down. Traders take advantage of this. Most investors don`t. They buy and hold. They are taught to buy and hold. Every financial adviser I have ever talked to says buy and hold, dollar cost average ect. That is why I say short selling transfers wealth from investors to traders.