3 ms·

If you sincerely think that Hertz is overvalued, why don't you short it? It seems like an easy money-making opportunity, if so.

haakonhr 6y ago
Not if they don't believe that the markets are efficient. It doesn't matter if you are, in some sense, "right" if the market disagrees. Wirecard is a prime example of this: a lot of short-sellers that, in the end, were right about the fact that it seems to have been a house of cards lost a lot of money.
fancyfredbot 6y ago
Because the market can stay irrational longer than I can stay solvent
eru 6y ago
Unfortunately, it's not that easy. The regulatory environment is not kind to short sellers. Matt Levine's Money Stuff often has examples of how shorting can go wrong. Recently there was a company that was accused of fraud. An obvious target for shorting. But: once the fraud properly came to light, the authorities promptly halted trading in the company's stock. After trading was halted, the shortsellers could not cover their shorts. And of course, in order to shortsell, you always need someone willing to lend you the stock in the first place. In the case of Hertz, https://fintel.io/ss/us/htz https://fintel.io/ss/us/htz does suggest that plenty of shortselling is going on. But https://finance.yahoo.com/news/why-bankrupt-hertz-short-squeeze-173507444.html https://finance.yahoo.com/news/why-bankrupt-hertz-short-sque... suggests that finding Hertz stock to borrow became harder over time.
TuringNYC 6y ago
Aside from the other issues (staying solvent long enough to profit), there is another issue - government intervention. You never know if the government will sweep in and save a company [unfairly?] or change terms -- either with a guarantee, bailout, or unlimited loans. Case: Bear Sterns, AIG, GS
- eru 6y ago
  One of the first things many European countries did to combat (?) the pandemic was to ban short selling. See eg https://www.reuters.com/article/uk-health-coronavirus-hedgefunds-shortse/hedge-funds-target-france-as-short-selling-bans-lifted-idUSKBN2321K7 https://www.reuters.com/article/uk-health-coronavirus-hedgef...

haakonhr 6y ago

Not if they don't believe that the markets are efficient. It doesn't matter if you are, in some sense, "right" if the market disagrees. Wirecard is a prime example of this: a lot of short-sellers that, in the end, were right about the fact that it seems to have been a house of cards lost a lot of money.

fancyfredbot 6y ago

Because the market can stay irrational longer than I can stay solvent

eru 6y ago

Unfortunately, it's not that easy. The regulatory environment is not kind to short sellers. Matt Levine's Money Stuff often has examples of how shorting can go wrong. Recently there was a company that was accused of fraud. An obvious target for shorting. But: once the fraud properly came to light, the authorities promptly halted trading in the company's stock. After trading was halted, the shortsellers could not cover their shorts. And of course, in order to shortsell, you always need someone willing to lend you the stock in the first place. In the case of Hertz, https://fintel.io/ss/us/htz https://fintel.io/ss/us/htz does suggest that plenty of shortselling is going on. But https://finance.yahoo.com/news/why-bankrupt-hertz-short-squeeze-173507444.html https://finance.yahoo.com/news/why-bankrupt-hertz-short-sque... suggests that finding Hertz stock to borrow became harder over time.

TuringNYC 6y ago

Aside from the other issues (staying solvent long enough to profit), there is another issue - government intervention. You never know if the government will sweep in and save a company [unfairly?] or change terms -- either with a guarantee, bailout, or unlimited loans. Case: Bear Sterns, AIG, GS

eru 6y ago
One of the first things many European countries did to combat (?) the pandemic was to ban short selling. See eg https://www.reuters.com/article/uk-health-coronavirus-hedgefunds-shortse/hedge-funds-target-france-as-short-selling-bans-lifted-idUSKBN2321K7 https://www.reuters.com/article/uk-health-coronavirus-hedgef...