Well, if the company were basically sound, it wouldn't go out of business... although it'd be mighty ripe for a hostile takeover. But Bear, Lehman, and numerou

Well, if the company were basically sound, it wouldn't go out of business... although it'd be mighty ripe for a hostile takeover. But Bear, Lehman, and numerous small companies that are usually the victim of this tactic, were leveraged to the gills, and were full of nasty liabilities. The temporary crisis of confidence caused by a falling stock price led creditors to start fleeing as well, preventing Bear from rolling over it's daily debt. As they point out in the article, Bear was highly dependent on overnight lending at that point. Also, making money via naked shorting doesn't require the company to die. It merely requires the share price to fall.