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> Stock shorters, as you point out, actively bet against a company or industry or economic structure in general, it's their benefit to see a company collapse or
by matwood 6y ago
> Stock shorters, as you point out, actively bet against a company or industry or economic structure in general, it's their benefit to see a company collapse or not do well.
Companies that have inefficiently deployed capital or have problems like a Theranos or Enron should collapse. People keep acting like shorts show up to a company like Apple and take it down. That's not at all what happens. Shorts are a lot like vultures. We may not like to see what they do, but they provide a service by cleaning up dead carcasses.
If you want to argue that shorters spread (dis)information in a company and should be more closely looked at, I might agree. My immediate counter though would be that I see way more positive information spread in general, and people rarely seem to check that until it so blatantly false things collapse.
- mattnewton 6y agoThe shorts don’t take money from the company, they take money from people unfortunate enough to invest in a failing company. In some cases that money could have helped the company land, in others it was going towards something doomed and possibly fraudulent, but either way it doesn’t come from the companies coffers directly unless the company does a buyback from the shorts. The people losing money are other investors. What if smart money had to bet on a competitor or growing some other investment instead?
- kasey_junk 6y agoThat’s a fine position to take so long as you recognize the vast majority of long money also doesn’t go to the companies coffers unless the do another offering. Your argument isn’t a moral one.
- mattnewton 6y agoMuch long money is absolutely used by the company indirectly; they can use their stock like a currency to raise funds with debt, pay employees, acquire companies with stock, etc. Thats hopefully a virtuous cycle where people do more stuff that creates value. I don’t mean to make a moral argument, just question the need for short positions. If the company is truly bad their shares should deflate as demand deflates, no short seller position necessary. I think, from the perspective of the needs of society, punishing bad investors who fail shouldn’t be as rewarding as finding the right investments to grow.
- kasey_junk 6y agoThat debt, acquisition and paying of employees is fraud. You are just pushing the risk onto those other entities with poor price discovery.
- mattnewton 6y agoAm I correct in reading that you think stock based acquisitions or employee compensation is all fraud?
- kasey_junk 6y agoIf it exists in a market with illegalized downside pressure. The sentiment that shorting isn’t necessary is particularly pernicious in the places where companies trade cash compensation for stock. Employee long positions derived from stock grants are already boosts to the optimistic view of a company. If there is no short position to determine fair pricing companies can use their already outsized advantage to take advantage of workers.
- danhak 6y agoTheranos collapsed without any shorting involved. Isn't this a counterpoint to the argument that shorting is required for "price discovery" and the unmasking of fraud?
- auntienomen 6y agoIt took 10 years. Might have been faster and wasted less capital if had been publicly traded and therefore possible to short it.
- gher-shyu3i 6y agoNot everyone is interested in going public (e.g. see Valve), and correcting one wrong with another is not a valid approach.