In New York Magazine, Jim Cramer gives his view on how short sellers can "assassinate" a company. He argues that the SEC needs to reinstate the uptick rule and use its power to investigage collusion and market manipulation by hedge funds shorting stocks.
Cramer, to his credit, does point out that short-sellers "simply can’t bring down an honest, well-capitalized firm; it will buy every share from you and take it right back up again in your face." Short selling, Cramer says, "doesn’t work against every firm; it just works against every financial firm that has lost credibility by insisting that it is doing well and then failing to disclose that it hasn’t been. That was Bear Stearns’ real flaw, and it is Lehman’s too."
Exactly. Opportunities for short-selling are created by the very companies that have mismanaged themselves and have misled the market for too long. Too often that is the simple fact that is missed or glossed over in most news coverage about short positions.
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