Fast forward 20 years, the dumb retails who were holding the bag but too dumb to sell are now looking at book value of $112 instead of $20. You see, the S&P annualized return is 9% per year so the $20 appreciated to $112. Been there done that. It is a Ponzi only if the underlying has no intrinsic value. Cheers.
10 year note yields 2.48%... That's why equities are in trouble, if you don't exit now, you become the bag holder. Risk free 2.48% or chase indexes. Statistically what it says is wait for a significant standard deviation move to the downside before making equity allocations.
http://www.businessinsider.com/sp-500-annualized-returns-2014-12 10% myth.. it depends on entry and exit.
Who do the 100 participants buy the initial shares from in the first step? Who buys the shorts that the banks sell short in the last step?
IPO have accredited subscriber placement, usually banks. Shorting is a borrowed trade, shares are borrowed and sold to the public or other banks who hedge out the position using options. Ultimately the bag holder is anyone but the two banks.