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Netscape Communications must be careful not to overprice its IPO. Netscape Communications may be fortunate to sell all of its overpriced issued shares, but if the price falls on the first day Netscape Communications could lose its marketability. Overpriced shares may also consist of short sale constraints. Short sale constraints can prevent negative information or opinions from being expressed in stock prices. (1) In the rational model of Harrison and Kreps (1978), differences of opinion, together with short sale constraints, create a "speculative premium" in which stock prices are higher than even the most optimistic investor's assessment of their value.(2) Short sale constraints generate a pattern of overpriced stock leading to subsequent low returns. (3) ...