What I am surprised of is how it is legal to have long position in stocks and then lie and pretend to increase the company value...

This here is why I never believe anything someone says about cryptocurrencies. Every time I ask a crypto enthusiast they'll eventually relent that yes they do own a lot of crypto they expect will go up in price.

(And in case someone argues that this is the same as anything else, it isn't. I own an iPhone. I recommend them to people, it works well etc. I don't benefit at all from Apple stock price going up.)

It’s legal but you must talk about facts and not make anything up, and you must act without insider information.

This is why the report is surgical in its wording.

That’s Hindenburg’s MO. Extensive research -> short position -> publication of research

It actually is legal and the way how Hindenburg Research (and other popular/infamous shortsellers) make money: Research and expose fraud to hold companies accountable, with a (massive) financial stake to be correct in the research.

Personally, I used to be quite antagonistic to shortsellers, but at least the ones holding onto the principles of journalistic integrity and good research provide good value to society. Just look at Wirecard.

> Personally, I used to be quite antagonistic to shortsellers, but at least the ones holding onto the principles of journalistic integrity and good research provide good value to society. Just look at Wirecard.

Which ones don't provide value to society, and how do they differ from shills with a long position?

> Which ones don't provide value to society, and how do they differ from shills with a long position?

For example, ones that bet on a stock price where the resulting market cap goes far below the net value of the company (i.e. value of assets - value of liabilities) without any indicators backing that. The "ape army" exposed these shortsellers at GME and iirc, led to the dissolution of at least two of them.

How do these differ from shills who pump a stock price far above the net value of the company without any indicators backing that?

What are you getting at?

There is no fundamental reason to be upset with short sellers; they can be honest or dishonest about their motives just as holders of long positions can be. When they are honest and open, they provide a service to the community in the same way that honest & open holders of long positions do.

The short position is fundamentally the belief a venture will fail and historically there is three ways for that to be a successful bet; 1) be lucky 2) do your research thoroughly and then be lucky or 3) cause that venture to fail.

So in this case your defense is limp wristed, you ask only 'well what about' without ever answering the core qualm.

> The short position is fundamentally the belief a venture will fail and historically there is three ways for that to be a successful bet; 1) be lucky 2) do your research thoroughly and then be lucky or 3) cause that venture to fail.

This mirrors precisely the ways for a long position to succeed. A holder of shares in a venture can work to cause that venture to be successful. This is pretty common, in fact.

Simple: short sellers can, if they manage to drive the underlying stock price too low, trigger automated "stop loss" orders, which can (and do) send the stock towards complete collapse. And that in turn can cause a cascade of stop-loss orders e.g. for stocks in indices where the flash-crashing stock has a sizable exposure.

Yes, market regulators can issue halt orders to stop all trade regarding affected stocks, but that still has the potential to cause widespread and immense loss of value.

People going long for no reason but "420.69 $GME" are funny to laugh at, and if they buy the right options they can make a lot of money, but there is no potential of cascade events.

Therefore, it makes sense to keep a close watch and a tight leash on shortsellers.

That is not an actual problem. And in the real world, institutional investors with capital reserves sufficient to really move markets don't generally use such simplistic "stop loss" orders. They have more sophisticated trading and hedging strategies.

There is no need to keep a tight leash on short sellers.

when valuing a company you generally look at cash flows and expectations of future cash flows. a company with $1 billion in the bank is worth less than $1 billion if they're posting annual net income of -$300mm

> and expectations of future cash flows

I'd summarize that under "liabilities"... but even then, a company can be dissolved to stop the outflow of cash and the assets sold at market value.

It's wonderful; a natural market incentive for well-capitalized players to expose fraud and misconduct instead of participate in it.

If you'd spent 2 years researching a topic you'd likely think otherwise.

Are you equally surprised that it's legal to go long and then talk your book?