>The largest opportunity for short sellers is when there is that uncertainty, because then you have a company walking a tightrope and there are people willing to bet that they make it to the other side.
Provide an example of this happening.
Judging by many of these comments, I'm not sure some people here understand the mechanics of how selling shares short actually works. It does not, defacto, destroy any value in the company.
There's a pretty good case that they were trying to do this to Tesla. We heard all these claims about how nobody was really buying their cars and so on, which turned out to be bullocks, but were being made at a time when they were in a precarious financing situation.
But the general problem with asking for examples is that nobody has the inside information necessary to verify them. I can point to any company that went bankrupt following negative media coverage at the behest of short sellers, but how is anybody supposed to prove whether or not they would have survived in the alternative?
> Judging by many of these comments, I'm not sure some people here understand the mechanics of how selling shares short actually works. It does not, defacto, destroy any value in the company.
Are you sure you know how short selling works? Short sellers borrow shares in the company and then sell them, which temporarily increases the supply of shares on the market and suppresses the price. If the company at that point issues new shares or wants to borrow money against the value of their stock, it costs them money, i.e. reduces access to capital or requires them to pay higher interest rates, which negatively impacts the business.
And that's just the result of the actual short selling, not including the reputational harm caused by false allegations (or over-hyped technically true allegations), which can reduce demand from not only investors but the business's customers.
There's also a nicely written Forbes piece [1] from January, which focuses on the then-current Tesla situation, but which also references the Bill Ackman v Herbalife short battle.
Another, perhaps ultimate, persuader of the value to markets/investors of short-selling would be Michael Lewis's book, The Big Short [2]. An often overlooked point about short-selling is that it is frequently done, and it was certainly so in this case, in demonstration of utter conviction that the masses are being duped; rather than as some calculated bet against a single company.
Lots of companies finance themselves by debt or stock offerings, this being especially relevant in distressed situations. There has to be a buyer on the other side. Short selling, even if not accompanied by short reports, is visible to market participants.
If anything it promotes good corporate behaviour. See Steinhof as a good recent example of a company outed for fraud on an industrial scale by a professional short seller
Provide an example of this happening.
Judging by many of these comments, I'm not sure some people here understand the mechanics of how selling shares short actually works. It does not, defacto, destroy any value in the company.