I loathe shorting because it enables large funds – using other people’s money – to drive down the share price to trigger loan covenants and/or margin calls of directors. This triggers further selling.
These ‘vultures’ target companies that are experiencing problems and the ‘vultures’ – in my unsustained opinion – operate in a pack with other ‘vultures’ to increase the selling pressure. The companies are forced to sell assets at fire sale prices to repay loans due to covenants being breached. Long term shareholders suffer significant losses. Some companies are liquidated.
Without the short selling driving the share price lower the companies would be better able to restructure their business operations and use time to overcome the problems.
Furthermore, short selling is not in the national interest. The argument that it increases liquidity to enable large investors to fill orders is misleading. The same large investors could invest in large parcels during capital raisings (both equity and debt).
End of my rant (all unsubstantiated theories).
TFC Price at posting:
$1.49 Sentiment: Buy Disclosure: Held
