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>So there exists a class of professional services designed to temporarily crash stock prices to make short sellers money? Yes. The technical term is "activist

>So there exists a class of professional services designed to temporarily crash stock prices to make short sellers money? Yes. The technical term is "activist short selling". The broad consensus is that it's good for the market, as it provides an incentive for investors and researchers to uncover fraud and mismanagement. Obviously someone could just make up a bunch of nonsense about a company to try and tank their share price, but that's all sorts of illegal. I think it's valid to think of activist short selling as a kind of distributed bug bounty program for the financial markets.

TheSpiceIsLife 7y ago
> but that's all sorts of illegal There's a subset of people who find this aspect appealing.
unreal37 7y ago
I recently read that, to be a successful large-scale short seller, you have to be an activist. You can't just sell a stock and wait passively for it to eventually go down. You HAVE to be out on CNBC and elsewhere trying to actively prove that the company is overvalued. Look at the way Bill Ackman and Pershing Square Ventures went after Herbalife for years. Not (just) because they thought a fraud was going on. But they were trying to make billions of dollars for themselves too. https://www.nytimes.com/2018/02/28/business/dealbook/ackman-herbalife-pershing-square.html https://www.nytimes.com/2018/02/28/business/dealbook/ackman-... Ackman spent 5 years on the road doing roadshows, on TV, trying to make the case for fraud.
- dbuder 7y ago
  I have a lot of respect for Ackman, but he got married to that trade.
- simula67 7y ago
  And he lost
  - david38 7y ago
    But he wasn’t wrong, so figured he had a reasonable chance of success.
    - unreal37 7y ago
      Interesting documentary on Netflix about that. Recommend a watch if anyone has been following Ackman and Herbalife. https://www.netflix.com/title/80108609 https://www.netflix.com/title/80108609
tylerl 7y ago
Ok, but imagine a bug bounty program where you're paid based on how damaging your website is to the product's short term reputation, regardless of whether you've actually disclosed (or even found) anything or substance.
- wpietri 7y ago
  I'll note that executives are paid based on how much they can hype a company's short-term reputation, so I think the problem isn't really with the short sellers here.
- wyxuan 7y ago
  Not really. Its illegal to lie like that and you can get sued for defamation. Plus your reputation is at stake. If I said GE is a fraud then no one believes me. But if Bill ackman calls it a fraud, that turns ears.
  - londons_explore 7y ago
    Read the report. There are no non-published assertions in it. They're all either publicly available numbers, or an analysts opinions. It would be very hard to sue them.
- btown 7y ago
  And imagine you lost your computer privileges if you made a bad call on what you found. Many successful activists are careful to make sure they’re right so their funds maintain their prowess, which may as well be the same thing.
deleted 7y ago
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agumonkey 7y ago
the financial equivalent of a a bug bounty.. never thought about it but every system needs external checkers so it's obvious in retrospect

TheSpiceIsLife 7y ago

> but that's all sorts of illegal There's a subset of people who find this aspect appealing.

unreal37 7y ago

I recently read that, to be a successful large-scale short seller, you have to be an activist. You can't just sell a stock and wait passively for it to eventually go down. You HAVE to be out on CNBC and elsewhere trying to actively prove that the company is overvalued. Look at the way Bill Ackman and Pershing Square Ventures went after Herbalife for years. Not (just) because they thought a fraud was going on. But they were trying to make billions of dollars for themselves too. https://www.nytimes.com/2018/02/28/business/dealbook/ackman-herbalife-pershing-square.html https://www.nytimes.com/2018/02/28/business/dealbook/ackman-... Ackman spent 5 years on the road doing roadshows, on TV, trying to make the case for fraud.

dbuder 7y ago
I have a lot of respect for Ackman, but he got married to that trade.
simula67 7y ago
And he lost
- david38 7y ago
  But he wasn’t wrong, so figured he had a reasonable chance of success.
  - unreal37 7y ago
    Interesting documentary on Netflix about that. Recommend a watch if anyone has been following Ackman and Herbalife. https://www.netflix.com/title/80108609 https://www.netflix.com/title/80108609

tylerl 7y ago

Ok, but imagine a bug bounty program where you're paid based on how damaging your website is to the product's short term reputation, regardless of whether you've actually disclosed (or even found) anything or substance.

wpietri 7y ago
I'll note that executives are paid based on how much they can hype a company's short-term reputation, so I think the problem isn't really with the short sellers here.
wyxuan 7y ago
Not really. Its illegal to lie like that and you can get sued for defamation. Plus your reputation is at stake. If I said GE is a fraud then no one believes me. But if Bill ackman calls it a fraud, that turns ears.
- londons_explore 7y ago
  Read the report. There are no non-published assertions in it. They're all either publicly available numbers, or an analysts opinions. It would be very hard to sue them.
btown 7y ago
And imagine you lost your computer privileges if you made a bad call on what you found. Many successful activists are careful to make sure they’re right so their funds maintain their prowess, which may as well be the same thing.

deleted 7y ago

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agumonkey 7y ago

the financial equivalent of a a bug bounty.. never thought about it but every system needs external checkers so it's obvious in retrospect