Selling short an IPO

B

Babak

I've heard that it is not possible to sell short an IPO within its first 4 weeks of trading. Could anyone please confirm this (preferably with some proof :D )?

I checked this site's archives and nasdaqtrader.com and sec.gov but didn't find anything relevant. Thanks in advance.
 
IPO shares can't be bought on margin in the first 4 weeks. Maybe that's why the retail can't short it. Prof traders should be able to short it, although in my experience it is close to impossible in the first days since there is a shortage of stock to borrow.

OLiver
 
just this past week jet blues ipo was able to be shorted for the first 2 hours of trading with TERRA NOVA .this was the first time i have ever seen an ipo able to be shorted
 
however, pro traders should be able to short it
when they do it intraday, since this eliminates the obligation
to settle / borrow, right ?
 
There is no rule against shorting an IPO. Most traders think you can't since the majority of firms will not journal the IPO to margin in the first 30 days. If the BD/Clearing firm allow their traders to short an IPO then it is legal. Not many firms do which is why you rarely see shortable shares in the first 30 days.
 
NOT ALLOWED...THOUGHT ABOUT DOING THE SAME THING BUT MY FORMER BROKERAGE (ETRADE) SAID THAT YOU ARE NOT ABLE TO DO THAT DURING THE FIRST MONTH.
 
i shorted Jet Blue on Friday thru terranova - and also noticed it wan't available for short later on in the day

tell that to etrade
 
I thought your BD had to have actual possession of the stock and since it would not be cleared for three days you were unable to borrow unless from the original underwriter. I did not think margin rules had anything to do with it as you buy it long on margin.

One of the NYSE specialist firms was wiped out during the UPS IPO because they shorted to fill orders and did not have the adequate capital to cover later
 
This is what I got from IB:

Dear Trader,

Thank you for your email. It is not a fixed rule of thumb, but you may want
to wait until the trades settle. Meaning 3 business days. Then in order
for you to short the stock it must be marginable. Usually this is not available
for 30 days, but this is not fixed either. The best advice I can give you is
foryou to keep trying to short the stock until you can.

John W
IB Customer Service
 
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