If this story was true, we would never see large swings in stock price, because they would already be priced in. But we do. Stock price is simply not an accurate enough predictor to create the incentives we want.
(The most obvious reason this is nonsense is that sometimes the future fall is only predictable to people inside the company. Short sellers don't help here. We need another incentive for those people to do the right thing.)
(The most obvious reason this is nonsense is that sometimes the future fall is only predictable to people inside the company. Short sellers don't help here. We need another incentive for those people to do the right thing.)