Not only that, it doesn't account for short sellers. Index funds will happily lend their "passive" shares to anyone (i.e. short sellers) willing to pay interest. So if prices start to rise as someone tries to buy 5%+1 of the shares, others will rightly determine that the shares are now overvalued and start selling them short (especially if the buyer is expected to harm the company), allowing the buyer to keep buying at a minor premium over the original price. Or even at a discount, if the purchase is seen as inevitable and the damage they're expected to do gets priced in.