Hedge funds have the legal ability for investors to do things like short sell.
Short selling involves borrowing shares in order to sell them with the expectation they buy the same shares and return them (when the price later drops). This is sometimes good for reasons I don’t understand.
Market prices are influenced by activity, so if a stock is shorted the price can go down. Selling can decrease value.
If you understand this, then you understand how short selling can decrease the value of a stock.
Hedge funds engage in short selling as a balance to stabilize other competing stock they hold for the long term in a portfolio. This is important because what happens with short selling can effect what happens with the entire portfolio of the hedge fund.
So when the price rose suddenly it becomes difficult for the hedge fund to repay the borrowed shares that have gone up in value due to demand. So price goes up, they have to start selling their long-term investments to capitalize, or they have to borrow money from the bank.
That’s a start of what is happening.
Someone can correct me if they know more about it.
Shorting will only drive down they price in the very short term. If it’s a good company the buyers will immediately jump on the lower price and bid it back up.
Overvalued - sellers sell, undervalued - buyers buy.