4 ms·

> This is mostly nonsense. Agreed. People should be able to take the pessimistic side of a trade. The one problem I could see with short selling is not the te

> This is mostly nonsense. Agreed. People should be able to take the pessimistic side of a trade. The one problem I could see with short selling is not the technical act of selling short, but the (dis)information campaign around a company that appears to follow. But, this happens both ways good and bad so it's probably a wash. > Most of Wall Street hates short sellers, because they drive down the prices of companies and confidence in markets There's also an emotional dislike of the person who wins when you lose. Short sellers are like the person playing 'don't pass' in craps.

wpietri 6y ago
> this happens both ways good and bad so it's probably a wash. Absolutely. A real problem in things that aren't publicly traded on open markets is hype asymmetry. Somebody who wants the share price to go up can put enormous amounts of time and money into creating the appearance that the stock is worth more than it is. But there's no corresponding incentive to puncture the hype. I suspect every one of us can name a privately held startup with a valuation we think is absurdly high. But there's no practical way to bet against them until they're publicly traded and we can short them or buy options (which may get hedged by buying or (short) selling stock).
jml78 6y ago
> But, this happens both ways good and bad so it's probably a wash. Only if you ignore reality. Huge hedge funds are called market movers for a reason. These hedge funds decide to short your company's stock and they have a direct impact on your stock value regardless of whether the hedge fund has any basis for actually shorting. Their "reason" can be 100% bullshit. Doesn't matter. They put a large short position on your company and it has an immediate direct impact. Not only that, like you said about disinformation, it also allows them to get other parts of the market to also jump on board. The way shorting works with hedge funds is that it is a self fulfilling prophecy a huge majority of the time And people talk about how capitalism has driven companies to only care about the next quarter. Everyone realizes this is overall a bad thing. Short sellers are one of the reasons you have to do that. I don't believe shorts have any intrinsic value they are actually bringing to the market. People choosing not to buy stock at existing prices does the same thing people claim shorting does. You don't need to borrow stock and sell it back making a profit to have a functioning trading system.
- auntienomen 6y ago
  There's a fallacy in your claims. Shorting affects the owners of the stock. But publicly traded companies don't normally own a large amount of their own stock. Their stock price doesn't have that direct an effect on their balance sheets. It affects their credit worthiness, but not in a mechanistic way. (Believe me, Gamestop isn't finding it easier to borrow just because its price has gone bonkers.)
  - formerly_proven 6y ago
    That's also a key reason why market cap is relatively meaningless outside of the actual stock market. E.g. TSLA has a giant market cap for an automaker, but that has no real operational impact and has essentially no relation to their behavior and performance in their market.
    - kgwgk 6y ago
      Tesla raised $12bn last year issuing new shares. This is obviously related to the stock price and has an operational impact.
rvba 6y ago
Naked shorts are not a pesimistic side of trade. "Normal" shorts are. In the widely reported Gamestop case, they write that over 140% of all shares were naked shorted - aka created from thin air. This is very different to normal shorting, that is ok.
manatees 6y ago
Did you read it? The website isn't criticizing shorting, it's criticizing naked short selling: selling a stock without first owning or borrowing it.

wpietri 6y ago

> this happens both ways good and bad so it's probably a wash. Absolutely. A real problem in things that aren't publicly traded on open markets is hype asymmetry. Somebody who wants the share price to go up can put enormous amounts of time and money into creating the appearance that the stock is worth more than it is. But there's no corresponding incentive to puncture the hype. I suspect every one of us can name a privately held startup with a valuation we think is absurdly high. But there's no practical way to bet against them until they're publicly traded and we can short them or buy options (which may get hedged by buying or (short) selling stock).

jml78 6y ago

> But, this happens both ways good and bad so it's probably a wash. Only if you ignore reality. Huge hedge funds are called market movers for a reason. These hedge funds decide to short your company's stock and they have a direct impact on your stock value regardless of whether the hedge fund has any basis for actually shorting. Their "reason" can be 100% bullshit. Doesn't matter. They put a large short position on your company and it has an immediate direct impact. Not only that, like you said about disinformation, it also allows them to get other parts of the market to also jump on board. The way shorting works with hedge funds is that it is a self fulfilling prophecy a huge majority of the time And people talk about how capitalism has driven companies to only care about the next quarter. Everyone realizes this is overall a bad thing. Short sellers are one of the reasons you have to do that. I don't believe shorts have any intrinsic value they are actually bringing to the market. People choosing not to buy stock at existing prices does the same thing people claim shorting does. You don't need to borrow stock and sell it back making a profit to have a functioning trading system.

auntienomen 6y ago
There's a fallacy in your claims. Shorting affects the owners of the stock. But publicly traded companies don't normally own a large amount of their own stock. Their stock price doesn't have that direct an effect on their balance sheets. It affects their credit worthiness, but not in a mechanistic way. (Believe me, Gamestop isn't finding it easier to borrow just because its price has gone bonkers.)
- formerly_proven 6y ago
  That's also a key reason why market cap is relatively meaningless outside of the actual stock market. E.g. TSLA has a giant market cap for an automaker, but that has no real operational impact and has essentially no relation to their behavior and performance in their market.
  - kgwgk 6y ago
    Tesla raised $12bn last year issuing new shares. This is obviously related to the stock price and has an operational impact.

rvba 6y ago

Naked shorts are not a pesimistic side of trade. "Normal" shorts are. In the widely reported Gamestop case, they write that over 140% of all shares were naked shorted - aka created from thin air. This is very different to normal shorting, that is ok.

manatees 6y ago

Did you read it? The website isn't criticizing shorting, it's criticizing naked short selling: selling a stock without first owning or borrowing it.