Why the S&P 500 and some other index funds require seasoning and apply “free float”

I explained what this means in another post but I have been asked a few times why this is sensible. Seasoning means the company at IPO Can’t join the index. Free float means even after it does, its weight is only based on how much got sold last, not the total number of shares. So here’s why it’s done. Let’s suppose a very lossy company burning through venture capital decides to IPO. AND let’s assume it is worth $10 million pre-IPO. And here’s the super cynical thing that could happen. Imagine th