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The way I understand it is that short selling is part of a check and balance against companies that you know are lying about their financials. It disincentivize
by izolate 6y ago
The way I understand it is that short selling is part of a check and balance against companies that you know are lying about their financials. It disincentivizes untruthworthy business practices by incentivizing calling companies out on their untruths.
- jfim 6y agoOne example of such a short sell was the report by Hindenburg research about NKLA [0], which also discloses their short position. The net outcome of such disclosures is that fraudulent activity is exposed, the people shorting the stock make a profit, the people who were holding the stock still have their shares, and hopefully new investors are more informed about the stock that's being shorted. Not all short sellers take this approach though, they could just short the stock because they think it's overvalued. It seems that it's what happened here, but ended up on the wrong side of the trade when WSB decided to buy GME. [0] https://hindenburgresearch.com/nikola/ https://hindenburgresearch.com/nikola/