Fraud Conviction Deals Blow to Short Sellers’ Shrinking Universe

The prospect of prison time for short-seller Andrew Left, found guilty Monday of securities fraud, is more than a personal comeuppance.

The case’s verdict is yet another blow to short-selling itself, a once-formidable force in financial markets that’s been battered by years of soaring stocks, retail investor activism, and growing regulatory pressure.

To their detractors in the C-suite, subreddits and everywhere in between, short-sellers say they provide a valuable service, sniffing out corporate fraud or simply keeping overheated stock prices in check. But a cocktail of factors has spurred a retreat that’s included some of the most voluble ...