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>Shitty companies failing is a necessary and important mechanism of a functioning economy. True >Look at the Soviet Union for an example of what happens when
by rcMgD2BwE72F 6y ago
>Shitty companies failing is a necessary and important mechanism of a functioning economy.
True
>Look at the Soviet Union for an example of what happens when no companies ever go bankrupt.
The Soviet Union was not a free market economy.
>Short activists expose shitty companies and as such, they play an important role in the economy.
In free market economies, shitty companies fail by themselves because their competitors offer better good or services. Short activists don't help make better competitors.
Companies in the Soviet Union needed more competition than short selling.
>Maybe Wirecard's fraud scheme would still be going on if it wasn't for short sellers.
Who knows? Tesla wouldn't exist if short sellers had their way either.
- Dylan16807 6y ago> In free market economies, shitty companies fail by themselves because their competitors offer better good or services. Short activists don't help make better competitors. If you want the market to encourage people to investigate fraud and bad news, then they need to be able to profit off of announcing it. When people don't figure out fraud, the company still suffers eventually but it does so much harder and hurts more people. For example, if Enron's cheating had been exposed a lot earlier it could have been stopped. Shorting has real and important benefits. And real downsides too, when shorters try to tank companies that had perfectly acceptable fundamentals. But it's definitely a tradeoff, not shorters being parasites.
- konschubert 6y agoWhy would Tesla not exist? A low stock price doesn't bankrupt a company.
- sumedh 6y agoIt can because if you want to raise money, the banks wont accept your shares as collateral making your job to raise money very difficult.
- konschubert 6y agoOnly if you need to raise money in order to survive. Which most companies don't.
- sumedh 6y ago> Which most companies don't. and some companies do, that is the point.
- MrMan 6y agoin free market economies people can lend each other ownership shares in public companies