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Can anyone name a single, legitimate company that has ever been "taken down" by short-sellers? A company which had a great business going, but short-sellers ru

Can anyone name a single, legitimate company that has ever been "taken down" by short-sellers? A company which had a great business going, but short-sellers ruined it? I don't even think it's possible. On the other-hand, frauds brought down by journalists and short-sellers are abundant. In my experience, CEOs (in this case, the board Chairman) whining about traders is a huge red flag. What do they care what a bunch of people are doing with their ownership in the company? It's irrelevant to the day-to-day operations of the company, but certainly harms the narrative.

lionsdan 6y ago
Indeed, if the short sellers are wrong, they should be able to take advantage like VW in 2008. https://www.reuters.com/article/us-volkswagen-idUSTRE49R3I920081028 https://www.reuters.com/article/us-volkswagen-idUSTRE49R3I92...
- AnthonyMouse 6y ago
  Doing that inherently requires having access to a lot of capital.
Qasaur 6y ago
You can't really say this without the followers of the Church of Musk attacking you for going against the saviour of the human race, but this is why I think there is something very fishy going on with Tesla and Elon Musk who also has a tendency to blame short-traders for any negative press (of which there is a lot, some of it extremely unsettling).
- itsoktocry 6y ago
  >but this is why I think there is something fishy going on with Tesla Well, maybe the Nikola thing will have people asking questions and holding Tesla to the same standard. We know, from depositions in the Solar City law suit, that the solar shingle reveal was faked and non-functional. The shingles didn't exist in that form then, and still don't (they buy panels from China, the factory in Buffalo isn't doing anything). The battery swap demo was also likely faked, as was the "Paint it Black" self-driving video from 2016 (demonstrating self-driving capabilities Tesla still doesn't have in the real world, today). Those are off the top of my head.
  - nemo44x 6y ago
    I’m curious about Tesla over hyping certain maturity of their tech and other things. They appear to me to dress up non-functional prototypes and make big events around them, only showing the feature in a certain, controlled environment. Sort of like a magician creating an illusion. How many years now has Tesla claimed that full autonomous driving will be ready by the end of the year? They sell a lot of that “software” which to me appears to be vapor ware and they claim the price will rise when the tech is GA’d so you should buy now. It just seems suspicious to me. Even the giga-factories don’t look anything like the designs they promoted. They look like, well every other car factory. I get that they don’t advertise so they smartly generate hype in other ways. Wasn’t Audi the first company to sell a level 3 car?
    - brisance 6y ago
      > They look like, well every other car factory. They're worse. Please, identify a modern car factory that builds cars in a tent.
      - sjwright 6y ago
        Given how critically successful the Model 3 is, maybe more companies need to start building their cars in tents too. (Or maybe... just maybe... the construction method of your factory walls doesn’t actually matter so much?)
    - postingawayonhn 6y ago
      > Even the giga-factories don’t look anything like the designs they promoted. They look like, well every other car factory. It turns out there's a reason factories look the way they do. Much better to design the production process first and then fit a building around it than to try and fit the production process into a pre-designed building that's made too look pretty.
      - itsoktocry 6y ago
        >Much better to design the production process first and then fit a building around it than to try and fit the production process into a pre-designed building that's made too look pretty. What do you base this off of? What "magic" production processes are Tesla utilizing that other OEMs are not? Aren't EVs far simpler to assemble? Tesla are building some of the lowest-rated cars out there in terms of fit and finish. Why do you believe they are doing anything from that end "better" than other manufacturers?
deleted 6y ago
[deleted]
dnadler 6y ago
Yes, short sellers are correct sometimes. Citron's report on Valeant comes to mind. Actually, as I recall there was a report prior to Citron's that was much more convincing though didn't get as much publicity.
moneywoes 6y ago
Luckin coffee?
- polymorph1sm 6y ago
  At least they are already delisted from nasdaq[1] and their stock did plummet since muddy waters reports. [1] https://www.marketwatch.com/story/luckin-coffee-to-be-delisted-from-the-nasdaq-2020-06-26 https://www.marketwatch.com/story/luckin-coffee-to-be-delist...
- hylaride 6y ago
  Luckin coffee had fraudulent numbers. It wasn’t an “otherwise good company”.
marvin 6y ago
Problem is, it's almost impossible to know unless you're there. Companies that are dependent on financing might not get financing if loud short sellers are able to change the narrative, and then fail to achieve goals that would be achievable if investors were on board. I don't know enough history to know concrete candidates, but I'd be very surprised if no company had ever been stopped from achieving a good trajectory by short sellers and other naysayers changing the perceptions of investors. Yes, there is a value in short selling as a market mechanism to detect fraud and correct incorrecly priced companies, but it's naïve to think it doesn't also incentivize destruction of initiatives that are actually valuable. I did follow the short campaign against Tesla closely from 2014-2018. And that project was vicious. I could easily see it toppling a less-financed company, or one where the quality of their engineering was less obvious. And trust me, although things might look black and white in retrospect, there was nothing obvious about Tesla's success in 2014. The indications were pretty clear if you followed it closely, but this reality was in very sharp contrast with the narrative. I believe it was a closer call than most would believe in reterospect. Comparisons with Nikola nonwithstanding, I believe you're wrong about loud short sellers in general not being able to destroy the prospects of a company that would succeed in their absence.
- AnthonyMouse 6y ago
  It's also fairly trivial to see that it's possible to destroy some companies this way simply by noting that some companies succeed and some companies fail, which implies that there exist companies at the margin whose success or failure depends on things like financing availability or interest rates. Moreover, companies in that position are exactly those with the greatest profit potential for short sellers. Companies that are obviously going to succeed or already have aren't likely to decline in value in the near future. Companies that are obviously going to fail will have declined in value already. The largest opportunity for short sellers is when there is that uncertainty, because then you have a company walking a tightrope and there are people willing to bet that they make it to the other side. The short sellers can take their money and then give the company a hard shove and hope that it makes them fall.
  - itsoktocry 6y ago
SpicyLemonZest 6y ago
I'm still highly skeptical of Nikola, but it's not quite fair to characterize their response this way. The chairman here isn't complaining about the trading activity itself, just about the traders' report which he claims is full of lies.
- ceejayoz 6y ago
  To be clear, though, he’s complaining it’s full of lies, while saying he won’t debunk them because they’re asking the SEC to get involved. Which will take years, and needn’t prevent them from disproving the claims. That’s suspicious.
  - SpicyLemonZest 6y ago
    Agreed.
- ogre_codes 6y ago
  Several of the claims should be fairly straight forward to dispute. For example, they should have some video of the truck driving under its own power as opposed to coasting down a long downhill. Certainly in this day and age they have plenty of documentation of their vehicles during testing and development.
yxhuvud 6y ago
There are plenty of deconstructed companies that have ended up with positive value left when all is said and done and creditors are paid. It is not super common but it does happen now and then.
odiroot 6y ago
> Can anyone name a single, legitimate company that has ever been "taken down" by short-sellers? As far as I remember, Matt Levine used to say, a company that sues short-sellers is most likely deep into securities fraud.
hylaride 6y ago
Short selling by itself won’t ruin an otherwise good company, but if (false) rumors are spread, it can affect the company’s ability to raise capital or affect its relationships with suppliers, who could get nervous.
- easytiger 6y ago
  Well as a public company if you aren't really able to prove the state of your balance sheet then you probably do have an issue.
electriclove 6y ago
https://teslamotorsclub.com/tmc/threads/elon-musk-vs-short-sellers.118431/ https://teslamotorsclub.com/tmc/threads/elon-musk-vs-short-s...
- itsoktocry 6y ago
  So your claim is that SolarCity was brought down by short-sellers, and not, in fact, that it was a terrible business? That's debatable. Borrowing short and lending on long-term leases was more likely the issue.
  - electriclove 6y ago
    Not my claim at all. The parent asked for an example of short sellers doing damage and I showed a highly documented example of Fairfax Financial
cwhiz 6y ago
No. But I still think short selling is absurd and I don’t understand why we allow it. If you don’t think a company will do well then don’t buy their stocks. Simple as that. I don’t know why we allow seemingly infinite market gambling that benefits no one except the gamblers.
- liability 6y ago
  If Hindenburg weren't financially incentivized to uncover this fraud, it seems likely they would not have bothered and many more people would get scammed by Nikola.
  - cwhiz 6y ago
    That’s what journalism is for.
    - liability 6y ago
      ¿Por qué no los dos? Journalists got to Theranos first, and short sellers got to Nikola first. With both in play, the odds of a timely exposé go up.
      - toby 6y ago
        Worth nothing that Theranos wasn't public, there was no opportunity to short-sell. If there had been they might have been exposed much earlier and done a lot less harm. I knew several people who said what they were claiming was impossible but they didn't really have any interest in being the whistleblower.
      - cwhiz 6y ago
        Only one of those things is beneficial to society or business.
        liability 6y ago
        Care to back up that opinion? I'm quite curious to know why you think Hindenburg exposing this fraud to the world, and consequently saving countless more people from being scammed, isn't beneficial to society and legitimate business.
boring_twenties 6y ago
What I wanted to ask was, can anyone name a single, legitimate company that has threatened to sue short-sellers and ended up not being exposed as a fraud and/or bankrupt?
- ant6n 6y ago
  Didn't Musk threaten short-sellers? Wasn't there also that weird promise to go private?
redis_mlc 6y ago
Insiders may have loans secured by company stock, so it impacts their ability to buy another yacht, winery or pay alimony.
deleted 6y ago
[deleted]

lionsdan 6y ago

Indeed, if the short sellers are wrong, they should be able to take advantage like VW in 2008. https://www.reuters.com/article/us-volkswagen-idUSTRE49R3I920081028 https://www.reuters.com/article/us-volkswagen-idUSTRE49R3I92...

AnthonyMouse 6y ago
Doing that inherently requires having access to a lot of capital.

Qasaur 6y ago

You can't really say this without the followers of the Church of Musk attacking you for going against the saviour of the human race, but this is why I think there is something very fishy going on with Tesla and Elon Musk who also has a tendency to blame short-traders for any negative press (of which there is a lot, some of it extremely unsettling).

itsoktocry 6y ago
>but this is why I think there is something fishy going on with Tesla Well, maybe the Nikola thing will have people asking questions and holding Tesla to the same standard. We know, from depositions in the Solar City law suit, that the solar shingle reveal was faked and non-functional. The shingles didn't exist in that form then, and still don't (they buy panels from China, the factory in Buffalo isn't doing anything). The battery swap demo was also likely faked, as was the "Paint it Black" self-driving video from 2016 (demonstrating self-driving capabilities Tesla still doesn't have in the real world, today). Those are off the top of my head.
- nemo44x 6y ago
  I’m curious about Tesla over hyping certain maturity of their tech and other things. They appear to me to dress up non-functional prototypes and make big events around them, only showing the feature in a certain, controlled environment. Sort of like a magician creating an illusion. How many years now has Tesla claimed that full autonomous driving will be ready by the end of the year? They sell a lot of that “software” which to me appears to be vapor ware and they claim the price will rise when the tech is GA’d so you should buy now. It just seems suspicious to me. Even the giga-factories don’t look anything like the designs they promoted. They look like, well every other car factory. I get that they don’t advertise so they smartly generate hype in other ways. Wasn’t Audi the first company to sell a level 3 car?
  - brisance 6y ago
    > They look like, well every other car factory. They're worse. Please, identify a modern car factory that builds cars in a tent.
    - sjwright 6y ago
      Given how critically successful the Model 3 is, maybe more companies need to start building their cars in tents too. (Or maybe... just maybe... the construction method of your factory walls doesn’t actually matter so much?)
  - postingawayonhn 6y ago
    > Even the giga-factories don’t look anything like the designs they promoted. They look like, well every other car factory. It turns out there's a reason factories look the way they do. Much better to design the production process first and then fit a building around it than to try and fit the production process into a pre-designed building that's made too look pretty.
    - itsoktocry 6y ago
      >Much better to design the production process first and then fit a building around it than to try and fit the production process into a pre-designed building that's made too look pretty. What do you base this off of? What "magic" production processes are Tesla utilizing that other OEMs are not? Aren't EVs far simpler to assemble? Tesla are building some of the lowest-rated cars out there in terms of fit and finish. Why do you believe they are doing anything from that end "better" than other manufacturers?

deleted 6y ago

[deleted]

dnadler 6y ago

Yes, short sellers are correct sometimes. Citron's report on Valeant comes to mind. Actually, as I recall there was a report prior to Citron's that was much more convincing though didn't get as much publicity.

moneywoes 6y ago

Luckin coffee?

polymorph1sm 6y ago
At least they are already delisted from nasdaq[1] and their stock did plummet since muddy waters reports. [1] https://www.marketwatch.com/story/luckin-coffee-to-be-delisted-from-the-nasdaq-2020-06-26 https://www.marketwatch.com/story/luckin-coffee-to-be-delist...
hylaride 6y ago
Luckin coffee had fraudulent numbers. It wasn’t an “otherwise good company”.

marvin 6y ago

Problem is, it's almost impossible to know unless you're there. Companies that are dependent on financing might not get financing if loud short sellers are able to change the narrative, and then fail to achieve goals that would be achievable if investors were on board. I don't know enough history to know concrete candidates, but I'd be very surprised if no company had ever been stopped from achieving a good trajectory by short sellers and other naysayers changing the perceptions of investors. Yes, there is a value in short selling as a market mechanism to detect fraud and correct incorrecly priced companies, but it's naïve to think it doesn't also incentivize destruction of initiatives that are actually valuable. I did follow the short campaign against Tesla closely from 2014-2018. And that project was vicious. I could easily see it toppling a less-financed company, or one where the quality of their engineering was less obvious. And trust me, although things might look black and white in retrospect, there was nothing obvious about Tesla's success in 2014. The indications were pretty clear if you followed it closely, but this reality was in very sharp contrast with the narrative. I believe it was a closer call than most would believe in reterospect. Comparisons with Nikola nonwithstanding, I believe you're wrong about loud short sellers in general not being able to destroy the prospects of a company that would succeed in their absence.

AnthonyMouse 6y ago
It's also fairly trivial to see that it's possible to destroy some companies this way simply by noting that some companies succeed and some companies fail, which implies that there exist companies at the margin whose success or failure depends on things like financing availability or interest rates. Moreover, companies in that position are exactly those with the greatest profit potential for short sellers. Companies that are obviously going to succeed or already have aren't likely to decline in value in the near future. Companies that are obviously going to fail will have declined in value already. The largest opportunity for short sellers is when there is that uncertainty, because then you have a company walking a tightrope and there are people willing to bet that they make it to the other side. The short sellers can take their money and then give the company a hard shove and hope that it makes them fall.
- itsoktocry 6y ago

SpicyLemonZest 6y ago

I'm still highly skeptical of Nikola, but it's not quite fair to characterize their response this way. The chairman here isn't complaining about the trading activity itself, just about the traders' report which he claims is full of lies.

ceejayoz 6y ago
To be clear, though, he’s complaining it’s full of lies, while saying he won’t debunk them because they’re asking the SEC to get involved. Which will take years, and needn’t prevent them from disproving the claims. That’s suspicious.
- SpicyLemonZest 6y ago
  Agreed.
ogre_codes 6y ago
Several of the claims should be fairly straight forward to dispute. For example, they should have some video of the truck driving under its own power as opposed to coasting down a long downhill. Certainly in this day and age they have plenty of documentation of their vehicles during testing and development.

yxhuvud 6y ago

There are plenty of deconstructed companies that have ended up with positive value left when all is said and done and creditors are paid. It is not super common but it does happen now and then.

odiroot 6y ago

> Can anyone name a single, legitimate company that has ever been "taken down" by short-sellers? As far as I remember, Matt Levine used to say, a company that sues short-sellers is most likely deep into securities fraud.

hylaride 6y ago

Short selling by itself won’t ruin an otherwise good company, but if (false) rumors are spread, it can affect the company’s ability to raise capital or affect its relationships with suppliers, who could get nervous.

easytiger 6y ago
Well as a public company if you aren't really able to prove the state of your balance sheet then you probably do have an issue.

electriclove 6y ago

https://teslamotorsclub.com/tmc/threads/elon-musk-vs-short-sellers.118431/ https://teslamotorsclub.com/tmc/threads/elon-musk-vs-short-s...

itsoktocry 6y ago
So your claim is that SolarCity was brought down by short-sellers, and not, in fact, that it was a terrible business? That's debatable. Borrowing short and lending on long-term leases was more likely the issue.
- electriclove 6y ago
  Not my claim at all. The parent asked for an example of short sellers doing damage and I showed a highly documented example of Fairfax Financial

cwhiz 6y ago

No. But I still think short selling is absurd and I don’t understand why we allow it. If you don’t think a company will do well then don’t buy their stocks. Simple as that. I don’t know why we allow seemingly infinite market gambling that benefits no one except the gamblers.

liability 6y ago
If Hindenburg weren't financially incentivized to uncover this fraud, it seems likely they would not have bothered and many more people would get scammed by Nikola.
- cwhiz 6y ago
  That’s what journalism is for.
  - liability 6y ago
    ¿Por qué no los dos? Journalists got to Theranos first, and short sellers got to Nikola first. With both in play, the odds of a timely exposé go up.
    - toby 6y ago
      Worth nothing that Theranos wasn't public, there was no opportunity to short-sell. If there had been they might have been exposed much earlier and done a lot less harm. I knew several people who said what they were claiming was impossible but they didn't really have any interest in being the whistleblower.
    - cwhiz 6y ago
      Only one of those things is beneficial to society or business.
      - liability 6y ago
        Care to back up that opinion? I'm quite curious to know why you think Hindenburg exposing this fraud to the world, and consequently saving countless more people from being scammed, isn't beneficial to society and legitimate business.

boring_twenties 6y ago

What I wanted to ask was, can anyone name a single, legitimate company that has threatened to sue short-sellers and ended up not being exposed as a fraud and/or bankrupt?

ant6n 6y ago
Didn't Musk threaten short-sellers? Wasn't there also that weird promise to go private?

redis_mlc 6y ago

Insiders may have loans secured by company stock, so it impacts their ability to buy another yacht, winery or pay alimony.

deleted 6y ago

[deleted]