Well Known "Short" Investor Citron Research Is Abandoning the Strategy as a Result of GameStop Losses

So you talk with your old buddy that works with a hedge fund and tell him that you know a way he can make a bunch of money.
They do a short go on CNN and spread some lies and the price of ZZ stock falls. They make more money, you get rid of an annoyance and you will be able to pick up some prime people at bargain basement prices when they are out of a job because their company collapses.

Even though the price of ZZ stock falls, ZZ has better products and better service and their sales keep increasing. Their profit is higher than the profit of YY Widget.

Why does the company collapse just because some guy on CNN lied about ZZ earnings or sales or whatever?

Even though the price of ZZ stock falls, ZZ has better products and better service and their sales keep increasing.

Not the way it works.

Once a company as been rumored they lose sales.

Their stock price falling means that they are no longer considered a safe or solid company to do business with.

If ZZ has a very loyal and active customer base they might carry through.

But they will be reduced and moved down the list.

Once you are down the list your parts don't arrive. You are moved to another shelf. You might even be dropped entirely from some retailers.

Once a company as been rumored they lose sales.

I'm happily using ZZ widgets, I don't care what some bozo analyst claims on CNN. It's not like there is only one analyst. Or a company can't respond to refute the rumor.

Their stock price falling means that they are no longer considered a safe or solid company to do business with.

If I'm not paying until the parts are delivered, they're still safe as far as I'm concerned.

Who makes that decision? The company? The analyst? You?

No one. It's a hard number based on factual reality, and all those people make the best guess they can to get the most value out of their paper.

Force it? You think it's worth $10 "based on revenue, profit, assets, and so forth", I think, "based on FUTURE revenue, SHRINKING profit, DECLINING assets, and so forth" that it's worth $1. So I borrow some and sell it at $10.

Sure, on a small scale whatever, but the huge scales that many of these hedge funds and other companies do this, selling large numbers of stocks in order to drive the price down, not because they actually think it's worth less, is manipulation.

No. I'm buying them at the market price because I'm hoping the price goes up.

Then why would that be manipulation?

But selling them short - at market price because I think they're worth less than people are selling them for is manipulation?

Selling large amounts of stock, that you don't even actually own? First, selling 'borrowed' stocks is already a shady area, and many times these companies aren't doing this as a market gamble - they do this in large bulk that forces the price down (basically supply and demand), in order to make a profit, or force a buyout of the company. That certainly is manipulation.

It's a hard number based on factual reality, and all those people make the best guess they can

Exactly. Some people guess it's going higher, some that it's going lower.

selling large numbers of stocks in order to drive the price down, not because they actually think it's worth less, is manipulation.

Why do you feel that?

Then why would that be manipulation?

Buying because you think it's going up isn't manipulation. Selling because you think it's going down isn't manipulation.

Selling large amounts of stock, that you don't even actually own?

So if I own 1000 shares, and sell them, that's not manipulation but if I borrow 1000 shares and sell them, it is?

First, selling 'borrowed' stocks is already a shady area

Why do you feel that?

and many times these companies aren't doing this as a market gamble - they do this in large bulk that forces the price down (basically supply and demand)

What about buying "in large bulk" to "force the price up"?

selling large numbers of stocks in order to drive the price down, not because they actually think it's worth less, is manipulation.

Why do you feel that?

What part of my statement has to do with feelings?

Buying because you think it's going up isn't manipulation. Selling because you think it's going down isn't manipulation.

I didn't say those were.

So if I own 1000 shares, and sell them, that's not manipulation but if I borrow 1000 shares and sell them, it is?

Arguably, yes. If I borrow your car, sell it, then go buy another one later of the same year, make, and model to give back to you, would you say that I actually borrowed your car? Or would you call it something else? "Borrowing" something in order to sell it, in almost any other situation, would likely be considered "theft" or "fraud".

First, selling 'borrowed' stocks is already a shady area

Why do you feel that?

Again, what part of my statement has anything to do with feelings? But hey, see my answer directly above.

What about buying "in large bulk" to "force the price up"?

That's manipulating the price as well, but no one complains about it because, usually, no one loses out in that situation. WallStreetBets and all these people are manipulating the price too; do you actually think GameStop is worth hundreds of dollars a share, and everyone just hasn't seen it until now? Do you think these guys, that follow stocks closely enough to catch such a short squeeze, really think GameStop is worth $22B? Why didn't any of them buy in a year ago when it was only valued at $800MM? They're perfectly aware that they're manipulated the price, that was the point of what they were doing!

What part of my statement has to do with feelings?

The part where you said "selling large numbers of (shares of) stocks" was manipulation.

So if I own 1000 shares, and sell them, that's not manipulation but if I borrow 1000 shares and sell them, it is?

Arguably, yes.

Why? Both sales should have precisely the same impact on the price.

If I borrow your car, sell it, then go buy another one later of the same year, make, and model to give back to you, would you say that I actually borrowed your car?

Shares are exactly identical, cars aren't. Silly example.

"Borrowing" something in order to sell it, in almost any other situation, would likely be considered "theft" or "fraud".

This isn't any other situation. I'm paying a fee and borrowing with permission. You don't want to lend shares, don't trade on margin.

Again, what part of my statement has anything to do with feelings?

"Shady"

That's manipulating the price as well,

It's not. Stock manipulation has a specific meaning. Simply buying (or selling) doesn't qualify.

do you actually think GameStop is worth hundreds of dollars a share,

Based on fundamentals, nope.

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.