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The short seller did nothing wrong. Shorting simply means he borrowed the stock in order to sell it-- sell high, wait for the price to drop, then buy low in ord
by syntheticcdo 12y ago
The short seller did nothing wrong. Shorting simply means he borrowed the stock in order to sell it-- sell high, wait for the price to drop, then buy low in order to return the shares to the lender. The buyer on the other side of the short sale should have done more due diligence. No one forced them (be it a person or an institution) to take up that position.
The Chinese company (or some affiliate) was the one who had pumped the stock up. The short seller was just a regular market participant who was rewarded for his hard work and diligence.
- jared314 12y agoIf you listen to the story, he shorted the stock, knowing it was a fraud, and then exposed it. He knowingly created more victims of the scam.
- karmacondon 12y agoHis short position added information to the market. At least in theory, other investors could have asked "Why does this person think that this company is less worth than it's current value?" and done their own research. The short position provided incentive for him to expose the fraud publicly. It would have been nice if he'd done this research and told everyone about his findings out of the goodness of his heart, but that's a lot of work for little personal reward. The ability to short provided an additional incentive to make the information as public as possible.