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Shitty company will go down in a natural way in a free market economy. Why do you feel you need to help it to go down? Why let people make money on someone's

Shitty company will go down in a natural way in a free market economy. Why do you feel you need to help it to go down? Why let people make money on someone's fail? Why let people have incentives to ruin other people lives?

konschubert 6y ago
> Why let people have incentives to ruin other people lives? We should build safety cushions for people, not companies. > Why do you feel you need to help it to go down? https://en.wikipedia.org/wiki/Wirecard_scandal https://en.wikipedia.org/wiki/Wirecard_scandal
- dandanua 6y ago
  Fraudulent company is not a general case. Such companies must be closed by regulators, not short sellers. Do you think it is a good idea to help Intel go bankrupt because it's shitty right now in comparison to AMD?
  - Dylan16807 6y ago
    > Do you think it is a good idea to help Intel go bankrupt because it's shitty right now in comparison to AMD? Of course not. But if either one of them has secret bad information, it's good for everyone to have it revealed to the public so the stock price can be more accurate. Fraud may be rare but companies have negative info all the time.
  - konschubert 6y ago
    No company goes bankrupt because of a low stock price.
  - threedots 6y ago
    What is the mechanism by which you think shortsellers cause companies to go bankrupt? Can you think of any examples of short sellers causing a bankruptcy?
    - ummonk 6y ago
      They soak up investor money that would have otherwise gone towards sufficiently capitalizing the company (via equity raises).
      - threedots 6y ago
        Short selling has both supply and demand effects. So while it 'soaks up investor money' it also creates demand for incremental money through lower prices.The laws right now basically exist to constrain the supply that can be brought on quickly to prevent that getting of line. That's one of the main reasons to ban naked short selling - because it removes the friction to massive and infinite supply increase. It's also super risky because if you don't succeed you end up short a bunch of shares at artificially lower prices. So practically the scenario you are worried about is already addressed in securities regulation. I would say that short sellers are even more important around primary transactions because then share price matters more. Good prices prevent new investors being left holding the bag and inefficient allocation of capital which could have gone to a different business with better investment opportunities.
Pyramus 6y ago
> Shitty company will go down in a natural way in a free market economy. This is the crux. "Shitty" as in obsolete business model: Yes. Shitty as in fraudulent company behaviour: No. In fact, fraudulent behaviour creates a competitive advantage. And there is only an incentive for the regulator to intervene in the most extreme cases. Wirecard employed thousands of employees, paid taxes, contributed to social security, and created wealth for investors. Tesla has accelerated the spread of EVs and similarly created enormous wealth for investors. These are real, significant positive effects.
edsykes 6y ago
If it's a free market economy why would shorting be banned? When it comes to that, why would naked short selling be banned? Free market means the market would decide on whether they want it or not and regulations would be gone.

konschubert 6y ago

> Why let people have incentives to ruin other people lives? We should build safety cushions for people, not companies. > Why do you feel you need to help it to go down? https://en.wikipedia.org/wiki/Wirecard_scandal https://en.wikipedia.org/wiki/Wirecard_scandal

dandanua 6y ago
Fraudulent company is not a general case. Such companies must be closed by regulators, not short sellers. Do you think it is a good idea to help Intel go bankrupt because it's shitty right now in comparison to AMD?
- Dylan16807 6y ago
  > Do you think it is a good idea to help Intel go bankrupt because it's shitty right now in comparison to AMD? Of course not. But if either one of them has secret bad information, it's good for everyone to have it revealed to the public so the stock price can be more accurate. Fraud may be rare but companies have negative info all the time.
- konschubert 6y ago
  No company goes bankrupt because of a low stock price.
- threedots 6y ago
  What is the mechanism by which you think shortsellers cause companies to go bankrupt? Can you think of any examples of short sellers causing a bankruptcy?
  - ummonk 6y ago
    They soak up investor money that would have otherwise gone towards sufficiently capitalizing the company (via equity raises).
    - threedots 6y ago
      Short selling has both supply and demand effects. So while it 'soaks up investor money' it also creates demand for incremental money through lower prices.The laws right now basically exist to constrain the supply that can be brought on quickly to prevent that getting of line. That's one of the main reasons to ban naked short selling - because it removes the friction to massive and infinite supply increase. It's also super risky because if you don't succeed you end up short a bunch of shares at artificially lower prices. So practically the scenario you are worried about is already addressed in securities regulation. I would say that short sellers are even more important around primary transactions because then share price matters more. Good prices prevent new investors being left holding the bag and inefficient allocation of capital which could have gone to a different business with better investment opportunities.

Pyramus 6y ago

> Shitty company will go down in a natural way in a free market economy. This is the crux. "Shitty" as in obsolete business model: Yes. Shitty as in fraudulent company behaviour: No. In fact, fraudulent behaviour creates a competitive advantage. And there is only an incentive for the regulator to intervene in the most extreme cases. Wirecard employed thousands of employees, paid taxes, contributed to social security, and created wealth for investors. Tesla has accelerated the spread of EVs and similarly created enormous wealth for investors. These are real, significant positive effects.

edsykes 6y ago

If it's a free market economy why would shorting be banned? When it comes to that, why would naked short selling be banned? Free market means the market would decide on whether they want it or not and regulations would be gone.