4 ms·

Short sellers are incentivized to create false rumors and sabotage a a company's reputation. That's not really good.

by Gitnumb 8y ago

AznHisoka 8y ago
By your logic, people who are long are incentivized to create false rumors to pump up a company’s reputation.
- romed 8y ago
  In practice, it is far, far more common for bad actors to run the pump and dump than to short and issue fake news. The latter is rare enough that we don't have a word for it. The former is common enough to be called "pump and dump". There's a good reason why shorting is not a common scam technique: your gains are capped at 100% and your risk is unlimited. On the long side, it's the opposite. A pump-and-dump has unlimited upside and the you can only lose 100%.
  - codewell 8y ago
    The short version is called short and distort. I'd like to see stats on which is more common.
    - romed 8y ago
      I was an investment professional from 2001 to 2009 and I never heard anyone say "short and distort". https://books.google.com/ngrams/graph?content=%22pump+and+dump%22%2C%22short+and+distort%22&year_start=1800&year_end=2000&corpus=15&smoothing=3&share=&direct_url=t1%3B%2C%22%20pump%20and%20dump%20%22%3B%2Cc0 https://books.google.com/ngrams/graph?content=%22pump+and+du... "Ngram not found: short and distort"
      - codewell 8y ago
        Perhaps it's a newer term. Now "short and distort" is around, for instance prominently as section 3 in the wikipedia article on "pump and dump" [0], and investopedia [1] also describe it. [0] https://en.wikipedia.org/wiki/Pump_and_dump https://en.wikipedia.org/wiki/Pump_and_dump [1] https://www.investopedia.com/terms/s/shortanddistort.asp https://www.investopedia.com/terms/s/shortanddistort.asp
- codewell 8y ago
  It's true that longs and shorts could both benefit from spreading false rumors. But shorts have an expiration date which can cause them to be much more incentivized to drive a rapid price change.

Short sellers are incentivized to create false rumors and sabotage a a company's reputation. That's not really good.

AznHisoka 8y ago

By your logic, people who are long are incentivized to create false rumors to pump up a company’s reputation.

romed 8y ago
In practice, it is far, far more common for bad actors to run the pump and dump than to short and issue fake news. The latter is rare enough that we don't have a word for it. The former is common enough to be called "pump and dump". There's a good reason why shorting is not a common scam technique: your gains are capped at 100% and your risk is unlimited. On the long side, it's the opposite. A pump-and-dump has unlimited upside and the you can only lose 100%.
- codewell 8y ago
  The short version is called short and distort. I'd like to see stats on which is more common.
  - romed 8y ago
    I was an investment professional from 2001 to 2009 and I never heard anyone say "short and distort". https://books.google.com/ngrams/graph?content=%22pump+and+dump%22%2C%22short+and+distort%22&year_start=1800&year_end=2000&corpus=15&smoothing=3&share=&direct_url=t1%3B%2C%22%20pump%20and%20dump%20%22%3B%2Cc0 https://books.google.com/ngrams/graph?content=%22pump+and+du... "Ngram not found: short and distort"
    - codewell 8y ago
      Perhaps it's a newer term. Now "short and distort" is around, for instance prominently as section 3 in the wikipedia article on "pump and dump" [0], and investopedia [1] also describe it. [0] https://en.wikipedia.org/wiki/Pump_and_dump https://en.wikipedia.org/wiki/Pump_and_dump [1] https://www.investopedia.com/terms/s/shortanddistort.asp https://www.investopedia.com/terms/s/shortanddistort.asp
codewell 8y ago
It's true that longs and shorts could both benefit from spreading false rumors. But shorts have an expiration date which can cause them to be much more incentivized to drive a rapid price change.