Although you might be ABLE to do it, it does violate an NASD rule to short an IPO in the first 30 days. Or so I've been told by a knowledgeable authority.
I was looking at ILA thinking of maybe buying it when it was about to close around 2.10 or so... A friend of mine came in and I told him about the temptation and that it didn't fit two of the strategy criteria but looked OK otherwise... He was like, I don't see why you should, but if you do and it bounces back a buck or so, you could make a fortune... I stuck with the strategy rules and didn't buy it... It's 4 days later and it's around $5 per share. I still think I did the right thing, but... http://finance.yahoo.com/q?s=ILA&d=c&k=c1&a=v&p=s&t=5d&l=on&z=m&q=l
I was under the impression that only the underwriting broker/dealer had actual possession of the shares on the first day of an IPO. Since there are three days to clear all of the other brokers did not have possession of the shares in order to loan them out to "shorts". If you did short on the first day it was quite probably an illegal short since they did not actually hold the shares. I think this is technically correct. I think the "30 days" is the quite period after the IPO.
Anyone remember a few years ago, a biotech called Entremed gapping up from 12 to 80 on a "news" article that was actually a year old? I remember the manager of the daytrading office came in before the open and told everyone that he'd let them short the stock as long as we covered before the close -- back then I didn't dare touch it, but I saw a few people with some nice point gains that day. The sick part of the story is that I remember someone who actually bought the stock around 60, and just held it in his account underwater for a few years. He eventually sold it at 80 when the nasdaq hit 5k.
A person who is 75 yers old bought Microsoft 1000 shares in 1985. He died by heart attack next year. Nobody knew he bought Microsoft shares untill 1996. His grandson found out the 1000 Microsoft shares become over $1 million value stocks after 10 years. The family sold half of shares to buy new house, cars, & put some cash into US bonds. They still hold half position into Microsoft. They are not planning to sell any near future. Of course, they tanked to grand father....
You can short the opening day. The 30 day rule was a myth perpetrated by the brokerages to inflate IPO stock values quickly.
Had a good laugh. I used to be a professional bowler between poker games and hustling pool. (Great training for the financial markets, eh?). There used to be an old timer who had been a great bowler in his youth who was always hanging around the bowling alley when I practiced. For years he'd been a dealer in Vegas, and when I'd make a lousy shot, he'd berate me with, "you f*ckn' flea"... I didn't know it was a Vegas expression. The old timer passed on a few years ago, so I can't confront him now. Pretty good... "lost $200 lots of times"
Had a doctor client in the middle '90s who sold his practice to a public medical practice company for the company's stock. When the stock ran up to $55, his share was $8.6MM. I advised him to should sell, because "the worst that could happen is that he'd have $8MM in the bank". (The stock was 99X earnings, the group was 50X, the market was 25X... seems cheap now.) I suggested he would get a chance to buy it back for .20 on the dollar sometime in the next few years. He said, "I like the management". I said, "what do you expect, it to become the next Microsoft?" Anyway, a few weeks later, he called me. When I heard his voice, I sympathized with him, but he didn't know why. The lead story on CNBC was that the company had missed earnings, guided down, and the stock open about $12... He hadn't heard. Eventually traded <$5. Soon after that, never heard about it again. Tsk, Tsk.