Felix Salmon talks about the Greenshoe, although he gets it slightly wrong (a rarity for Mr Salmon). The Greenshoe is the option to sell an extra 15% of the issue, it isn't about shorting the issue. The SEC allows the underwriters to take a naked short as they are making a market in the new IPO stock. It is the combination of these two things where the financial magic happens (see my Friday post).
From Business Insider: