Matt Levine’s Money Stuff: People Dislike Activist Short Selling (Correct)

Hindenburg

The basic business model of an activist short seller is:

1. Investigate a company, ideally using only public sources.
2. Find out that the company is bad.
3. Short its stock.
4. Put out a public report describing your findings — “this company is bad” — in a zippy, emphatic, hopefully accurate way.
5. Watch the stock go down, because people read your report, realize that the company is bad and dump the stock.
6. Profit, by covering your short at the new, lower market price reflecting the new, accurate, bad information that you have published about the company.

Obviously some short sellers, sometimes, will deviate from this ...