Interesting perspective on the impact of ETFs on small public companies. His point is to discuss the reason for the paucity of tech firms going public, but I found it enlightening generally. I'm not sure this is good or bad for purchasing individual small-cap stocks.
If an ETF is comprised of large cap stocks like Microsoft and Dell, that’s fine, but if the index is composed of smaller companies like the Russell 2000 index, those companies with very few shares outstanding are in for a wild ride. One ETF, IWM-Russell 2000, is the largest shareholder for more than 800 of the companies in that index. If the ETF goes up then the ETF has to buy more shares of the underlying securities or issue more shares of the ETF, itself. If the ETF goes down then it may have to sell shares. And none of this has anything to do with the fundamentals of those particular underlying stocks.