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Doesn't the success of a short come down to crowd psychology? If there's a company with a given stock price, and somebody convinces a significant portion of in

Doesn't the success of a short come down to crowd psychology? If there's a company with a given stock price, and somebody convinces a significant portion of investors to short it, on the other side the CEO and other shareholders tries foil the short by using their free cash to buy up the new shares. The success or failure of the short hinges on which side is manages to convince/intimidate/sway the majority stockholders regardless of fundamentals. If the short sellers manage to recruit more stockholders (by value) - they win (in terms of value), if the company's supporters are move more money - the price doesn't go down and the short sellers are left with the bills.

freejazz 1y ago
> regardless of fundamentals Haha!
rsynnott 1y ago
_Generally_, people short (or buy puts, anyway) on companies because they think they will go down. You're thinking of a kind of _attack_, but that's not at all the norm. Most shorts are just people thinking "the market if overpricing this"; if they're right (and if the market corrects itself in reasonable time), they make money. (There is a third scenario, where the likes of Hindenburg Research take out a short position and then reveal problems with the target company, which naturally pushes their price down, but again that's rare.)
chollida1 1y ago
> Doesn't the success of a short come down to crowd psychology? Not really. I've shorted 100s of instruments on the financial market and this just doesn't ring true. Often the best shorts are not the worst companies but the once that have had performed the best over the past 6 months to a year because that generally means they've overshot their valuation and should rationally come back down to a more reasonable level. PLTR certainly fits the bill here. I think a big misconception the public has about short sellers is that they short to zero. The vast majority of directional shorts look alot more like "short company that has 3x n the last year from $200 down to $120 where its fundamentals or financial ratios make more sense". And this ignores that from a money manager's standpoint more than half the shorts put on aren't negative bets on a company but rather a downside hedge against another bet that a related stock will go up. IN this case you really don't care about how the shorted stock performs as long as its a good hedge for your upside bet. Never once have I initiated or participated in a public campaign to promote my short and the vast majority of hedge funds fit that profile. The fact that there have been a few high profile short cases that most of us know actually helps illustrate just how rare it is.

freejazz 1y ago

> regardless of fundamentals Haha!

rsynnott 1y ago

_Generally_, people short (or buy puts, anyway) on companies because they think they will go down. You're thinking of a kind of _attack_, but that's not at all the norm. Most shorts are just people thinking "the market if overpricing this"; if they're right (and if the market corrects itself in reasonable time), they make money. (There is a third scenario, where the likes of Hindenburg Research take out a short position and then reveal problems with the target company, which naturally pushes their price down, but again that's rare.)

chollida1 1y ago

> Doesn't the success of a short come down to crowd psychology? Not really. I've shorted 100s of instruments on the financial market and this just doesn't ring true. Often the best shorts are not the worst companies but the once that have had performed the best over the past 6 months to a year because that generally means they've overshot their valuation and should rationally come back down to a more reasonable level. PLTR certainly fits the bill here. I think a big misconception the public has about short sellers is that they short to zero. The vast majority of directional shorts look alot more like "short company that has 3x n the last year from $200 down to $120 where its fundamentals or financial ratios make more sense". And this ignores that from a money manager's standpoint more than half the shorts put on aren't negative bets on a company but rather a downside hedge against another bet that a related stock will go up. IN this case you really don't care about how the shorted stock performs as long as its a good hedge for your upside bet. Never once have I initiated or participated in a public campaign to promote my short and the vast majority of hedge funds fit that profile. The fact that there have been a few high profile short cases that most of us know actually helps illustrate just how rare it is.