If you are short a company then you benefit from harming it. In the example you provide, the short seller could benefit by exacerbating covid, by sabotaging the response. I'm not saying I'm definitely against all forms of shorting because of this, but that is one drawback at the least.
if you are long a company then you benefit from helping it. For example, lobbying to dismantle environmental regulations to increase the value of your fossil fuel stocks
This is the same argument often made against prediction markets. I remain unconvinced this is a significant issue, but I'm always open to changing my mind :)
