So that others reading this are 100% clear as your second para...

So that others reading this are 100% clear as your second para is still implying the wrong thing:

No institutional investors -- i.e. active or passive -- take an active decision to partake in a sec lending program that in any way is related to the SP performance of their holdings. No risk mgmt committee, investment committee or fund board would ever sign off on that. Sec lending decisions are portfolio wide decisions made at one point in time and taken them actively on a security by security basis would be a breach of the most basic portfolio and risk management tenets.

Anyone wishing to short a name can ask their PB for inventory and they will approach clients to source it if its not available, so simply increasing the size of inventory due to new long holders participating in stock loan programs itself doesn't really mean anything except slightly lower (implied) financing costs for those wanting to short. The latter are set daily and repricing does take into consideration a number of factors so having a larger pool doesn't necessarily mean it will make it cheaper for shorters to source inventory at all times. Access is typically a function of price in this case and that distinction is important. Also remember this is a second side of a coin which actually would be preceded by substantial capital inflows into the name, so remaining objective is as always critical.

Short sellers fulfill imo a critical function which may not be what some holders who bought at overpriced levels will want to hear due to (potential, not guaranteed!!) ST implications, but these holders would have had to justify somehow to themselves why buying at a high price level made sense at the time of purchase. That typically is some rationalization of "LT potential" or "a lot of upside as the firm grows" and that usually does imply a longer time frame. Leaving the validity of the argument that short sellers push prices down aside (which is up for discussion), a lower and more reasonable price should actually make it more palatable for fundamental institutional investors to acquire the name if they share the view on that LT potential. And we already discussed relative size implications of Long vs. Short in that case. So it really pays to consider all angles before jumping to quick conclusions about what this means. It's a bit more nuanced than has been portrayed in some of these points but generally it is tilting towards one side.

Anyway, anyone wishing to read up more on this can find plenty of research out there and explanations of how it works and why it supports a healthy market.