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There is absolutely nothing wrong with short sellers. People who attack short sellers only do it when they are protecting their rich friends who are CEOs. Ther

There is absolutely nothing wrong with short sellers. People who attack short sellers only do it when they are protecting their rich friends who are CEOs. There is absolutely nothing wrong with redditors fucking with short sellers. People who are clutching their pearls about this are only trying to protect rich friends who are hedge fund managers. There is nothing wrong, illegal, or immoral about trying to "manipulate" the stock market unless you are committing fraud or have insider information. CEOs of companies, activist investors, and analysts do this for a living every day. They are not more qualified than us to have and share opinions and history tells us they are perhaps much less. There is absolutely zero reason for anyone - SEC, The Government, robinhood, the exchanges, Facebook - to intervene and anyone who is considering intervention right now is only doing it to protect their rich hedge-fund friends.

tcbawo 6y ago
Not a lawyer, but pump and dump schemes are illegal under existing law: https://www.investopedia.com/terms/p/pumpanddump.asp https://www.investopedia.com/terms/p/pumpanddump.asp Even if the motivation of the 'pump' aspect is perceived to be righting a wrong, consumers left holding the bag will be harmed. The companies involved are intervening to avoid additional liability (they may already be sanctioned for not having safeguards in place). There will most certainly be civil and criminal investigation into the users involved. Although I doubt the government is equipped to investigate the sheer volume of material.
- AnthonyMouse 6y ago
  The difference here is that the people left holding the bag are nominally the short sellers, not anyone being conned into buying the stock. There is a risk that you could hold it too long, i.e. past when they've closed their positions, but that risk is known up front and you're not deceiving anybody. An interesting resolution to this would be if GameStop would allow the short sellers to close their positions by selling them newly minted shares. The result would be that the company would get all the money instead of the shareholders. But the shareholders own the company. So the share price would only crash by half (from the dilution) instead of 99% or whatever it is now. Which would also have the effect of saving the company.
  - BobbyJo 6y ago
    Short sellers aren't holding the bag, they are holding money and owe someone the bag. People who are long are the ones that will suffer when the inevitable crash comes. Also, I don't believe it's legal for a public companies to issue shares to specific parties at sub-market prices. It certainly wouldn't be legal for the to do it if shareholders didn't approve of it.
    - perl4ever 6y ago
      GameStop filed in December with the SEC to sell up to $100M in stock at the market, from time to time. Now it seems like a laughably small amount. I think it is common for public companies to sell stock below market though. If they set a price ahead of time, unlike GameStop in this instance, then the market price will change, right?
      - BobbyJo 6y ago
        The market price will change yes, but companies have legal fiduciary duty to maximize shareholder value. Purposefully selling shares below value to non-shareholders is obviously a violation of that duty.
  - woah 6y ago
    Your comment neatly summarizes everything that is incorrect about the conventional wisdom of the past couple days. People think this is somehow “taking money from hedge funds”. When the short squeeze happens (if it happens), do you think that the retail traders who yolo’d their savings (there are many of these) will be the ones to sell at the correct second? No. Maybe one or two hedge funds will declare bankruptcy. The rest will rake in the dough. And a large number of stupid people will find themselves poorer. Personally, I’m not for over-regulation. To some extent, people need to take personal responsibility. But conning the stupid is immoral. The many ill-informed twitterati, pseudo-intellectuals, and political grifters who have taken to cheering a transparent pump n dump will find themselves in an awkward situation in the next few weeks.
    - 6y ago
BobbyJo 6y ago
Depends on how you define 'wrong'. The purpose of the stock market is asset allocation, to ensure capital is used efficiently. Companies with high stock prices can issue shares to invest in their business when needed. People are voting with their money for companies to live or die. In that sense, certain forms of 'manipulation' are indeed wrong as they decrease capital efficiency in the system. You can argue that the stock market has ceased to function this way already, but to that I'd say: two wrongs don't make a right.
- santoshalper 6y ago
  That's your definition of the purpose of the stock market.
jessaustin 6y ago
People who are clutching their pearls about this are only trying to protect rich friends who are hedge fund managers. Lots of hedge reptiles were on the momentum side rather than the short side. They've ridden it up, and eventually they'll ride it back down. There's no way they'll allow regulation to interfere with this sort of opportunity. Smart money does not outlaw dumb money.
ashtonkem 6y ago
> There is nothing wrong, illegal, or immoral about trying to "manipulate" the stock market unless you are committing fraud or have insider information. Market manipulation is a crime under Section 9(a)(2) of the Securities Exchange Act of 1934. There is a big difference between buying or selling because you think a stock is over or under valued, and trying to manipulate a stock price to extract money from people not in on the manipulation.
- midasuni 6y ago
  Hedge funds do that all The time
  - twic 6y ago
    Give us five examples of hedge funds doing this in the last year, then. SPOILER: you can't, because it isn't true. It's an incredibly popular myth, but it is just a myth.
    - midasuni 6y ago
      https://www.somalilandcurrent.com/2020/09/13/trafiguras-scandalous-corruptions/ https://www.somalilandcurrent.com/2020/09/13/trafiguras-scan...
      - twic 6y ago
        You've got one case, from three years ago, that was successfully prosecuted. So you're saying i'm right?
        ric2b 6y ago
        Here's another, claiming it's common: https://www.youtube.com/watch?v=gMShFx5rThI https://www.youtube.com/watch?v=gMShFx5rThI
- guilhas 6y ago
  So you think GameStop is a solid company with a great future? And short selling completely unreasonable?
njharman 6y ago
I have no rich friends to protect, but I still think short sellers suck. I don’t think they should be banned but they fucksure aren’t deserving of compassion or concern when their gambles backfire. People defending short sellers are likely to be one and/or protecting their rich short seller friends.
- rswail 6y ago
  Short sellers are taking a bet on the share price. Long buyers are taking the other side of that bet. Neither side is deserving of compassion or concern as long as they are fully informed on the underlying nature of the share of the business they are buying. Selling a house that you have a mortgage on is selling something that you only partially own. Short sellers are selling something they borrowed because what they borrowed is fungible (ie one share in GME is equivalent to any other share in GME). The real question is whether what they borrowed exists and whether the owner of that is doing the right thing by lending it. If owners of shares won't lend, then short sellers can't borrow. Should a pension fund that owns shares that are expected to increase in value (otherwise why do they own it), lend that share to someone who is actively trying to reduce its value?
  - benrbray 6y ago
    The reason for the stock market to exist is ostensibly to help businesses succeed by competing for investors. But at the moment we have a casino, and shorts are one manifestation of that fact. Short sellers are effectively betting against the success of a company, which gives them an incentive to do everything in their power to put that company out of business. And don't say "but that's illegal!" since our enforcement system has no teeth and big players commit crimes all the time whenever the fines are lower than the cost of legal alternatives.
    - ashtonkem 6y ago
      > Short sellers are effectively betting against the success of a company And when a company is overvalued or committing fraud, that is a good thing. Stopping a bubble from growing is how you reduce the harm inflicted on regular investors. > which gives them an incentive to do everything in their power to put that company out of business And the long position is incentivized to hype up a business up to and beyond the line of fraud. Both sides of a financial transaction can perform their duties fairly, or corruptly. Life is not so simple as to declare only one party the problem.
einpoklum 6y ago
You said "absolutely nothing wrong". Regardless of the legality - the entire stock market, is not mechanisms which lead to equitable and socially beneficial distribution of resources, efforts, products, services. Fundamental needs and well-recognized valid interests of the majority of the population (in the US and in the world at large) are unmet and unattended to, while limited interests of small elites are well catered to. So, there is a lot wrong with short-selling as part of a wider mechanism.

tcbawo 6y ago

Not a lawyer, but pump and dump schemes are illegal under existing law: https://www.investopedia.com/terms/p/pumpanddump.asp https://www.investopedia.com/terms/p/pumpanddump.asp Even if the motivation of the 'pump' aspect is perceived to be righting a wrong, consumers left holding the bag will be harmed. The companies involved are intervening to avoid additional liability (they may already be sanctioned for not having safeguards in place). There will most certainly be civil and criminal investigation into the users involved. Although I doubt the government is equipped to investigate the sheer volume of material.

AnthonyMouse 6y ago
The difference here is that the people left holding the bag are nominally the short sellers, not anyone being conned into buying the stock. There is a risk that you could hold it too long, i.e. past when they've closed their positions, but that risk is known up front and you're not deceiving anybody. An interesting resolution to this would be if GameStop would allow the short sellers to close their positions by selling them newly minted shares. The result would be that the company would get all the money instead of the shareholders. But the shareholders own the company. So the share price would only crash by half (from the dilution) instead of 99% or whatever it is now. Which would also have the effect of saving the company.
- BobbyJo 6y ago
  Short sellers aren't holding the bag, they are holding money and owe someone the bag. People who are long are the ones that will suffer when the inevitable crash comes. Also, I don't believe it's legal for a public companies to issue shares to specific parties at sub-market prices. It certainly wouldn't be legal for the to do it if shareholders didn't approve of it.
  - perl4ever 6y ago
    GameStop filed in December with the SEC to sell up to $100M in stock at the market, from time to time. Now it seems like a laughably small amount. I think it is common for public companies to sell stock below market though. If they set a price ahead of time, unlike GameStop in this instance, then the market price will change, right?
    - BobbyJo 6y ago
      The market price will change yes, but companies have legal fiduciary duty to maximize shareholder value. Purposefully selling shares below value to non-shareholders is obviously a violation of that duty.
- woah 6y ago
  Your comment neatly summarizes everything that is incorrect about the conventional wisdom of the past couple days. People think this is somehow “taking money from hedge funds”. When the short squeeze happens (if it happens), do you think that the retail traders who yolo’d their savings (there are many of these) will be the ones to sell at the correct second? No. Maybe one or two hedge funds will declare bankruptcy. The rest will rake in the dough. And a large number of stupid people will find themselves poorer. Personally, I’m not for over-regulation. To some extent, people need to take personal responsibility. But conning the stupid is immoral. The many ill-informed twitterati, pseudo-intellectuals, and political grifters who have taken to cheering a transparent pump n dump will find themselves in an awkward situation in the next few weeks.
  - 6y ago

BobbyJo 6y ago

Depends on how you define 'wrong'. The purpose of the stock market is asset allocation, to ensure capital is used efficiently. Companies with high stock prices can issue shares to invest in their business when needed. People are voting with their money for companies to live or die. In that sense, certain forms of 'manipulation' are indeed wrong as they decrease capital efficiency in the system. You can argue that the stock market has ceased to function this way already, but to that I'd say: two wrongs don't make a right.

santoshalper 6y ago
That's your definition of the purpose of the stock market.

jessaustin 6y ago

People who are clutching their pearls about this are only trying to protect rich friends who are hedge fund managers. Lots of hedge reptiles were on the momentum side rather than the short side. They've ridden it up, and eventually they'll ride it back down. There's no way they'll allow regulation to interfere with this sort of opportunity. Smart money does not outlaw dumb money.

ashtonkem 6y ago

> There is nothing wrong, illegal, or immoral about trying to "manipulate" the stock market unless you are committing fraud or have insider information. Market manipulation is a crime under Section 9(a)(2) of the Securities Exchange Act of 1934. There is a big difference between buying or selling because you think a stock is over or under valued, and trying to manipulate a stock price to extract money from people not in on the manipulation.

midasuni 6y ago
Hedge funds do that all The time
- twic 6y ago
  Give us five examples of hedge funds doing this in the last year, then. SPOILER: you can't, because it isn't true. It's an incredibly popular myth, but it is just a myth.
  - midasuni 6y ago
    https://www.somalilandcurrent.com/2020/09/13/trafiguras-scandalous-corruptions/ https://www.somalilandcurrent.com/2020/09/13/trafiguras-scan...
    - twic 6y ago
      You've got one case, from three years ago, that was successfully prosecuted. So you're saying i'm right?
      - ric2b 6y ago
        Here's another, claiming it's common: https://www.youtube.com/watch?v=gMShFx5rThI https://www.youtube.com/watch?v=gMShFx5rThI
guilhas 6y ago
So you think GameStop is a solid company with a great future? And short selling completely unreasonable?

njharman 6y ago

I have no rich friends to protect, but I still think short sellers suck. I don’t think they should be banned but they fucksure aren’t deserving of compassion or concern when their gambles backfire. People defending short sellers are likely to be one and/or protecting their rich short seller friends.

rswail 6y ago
Short sellers are taking a bet on the share price. Long buyers are taking the other side of that bet. Neither side is deserving of compassion or concern as long as they are fully informed on the underlying nature of the share of the business they are buying. Selling a house that you have a mortgage on is selling something that you only partially own. Short sellers are selling something they borrowed because what they borrowed is fungible (ie one share in GME is equivalent to any other share in GME). The real question is whether what they borrowed exists and whether the owner of that is doing the right thing by lending it. If owners of shares won't lend, then short sellers can't borrow. Should a pension fund that owns shares that are expected to increase in value (otherwise why do they own it), lend that share to someone who is actively trying to reduce its value?
- benrbray 6y ago
  The reason for the stock market to exist is ostensibly to help businesses succeed by competing for investors. But at the moment we have a casino, and shorts are one manifestation of that fact. Short sellers are effectively betting against the success of a company, which gives them an incentive to do everything in their power to put that company out of business. And don't say "but that's illegal!" since our enforcement system has no teeth and big players commit crimes all the time whenever the fines are lower than the cost of legal alternatives.
  - ashtonkem 6y ago
    > Short sellers are effectively betting against the success of a company And when a company is overvalued or committing fraud, that is a good thing. Stopping a bubble from growing is how you reduce the harm inflicted on regular investors. > which gives them an incentive to do everything in their power to put that company out of business And the long position is incentivized to hype up a business up to and beyond the line of fraud. Both sides of a financial transaction can perform their duties fairly, or corruptly. Life is not so simple as to declare only one party the problem.

einpoklum 6y ago

You said "absolutely nothing wrong". Regardless of the legality - the entire stock market, is not mechanisms which lead to equitable and socially beneficial distribution of resources, efforts, products, services. Fundamental needs and well-recognized valid interests of the majority of the population (in the US and in the world at large) are unmet and unattended to, while limited interests of small elites are well catered to. So, there is a lot wrong with short-selling as part of a wider mechanism.