Short And Distort

A "short," in the financial sense, represents a bet that a stock's price will go down. An investor sees a stock they think is overpriced, and they put a short in place to take advantage of the eventual correction.

So far, so good. Nothing wrong with a short in general. It's all part of a healthy market. A stock gets too high...short sellers step in as part of the process of efficient price discovery.

It's the "distort" part that gets...grimy. The strategy here isn't just to short the stock and see what happens. Instead, the investor does what they can to push shares lower. They publish blogs talking about how bad the company is. They tweet about the CEO's questionable personal hygiene. On the far end of the spectrum, they spread rumors and make up stories to spark a sell off (in other words, they distort the truth).

The goal here is to drive share prices lower, so that the short becomes more profitable. It's essentially the opposite of a "pump and dump" strategy, which is based on making a questionable stock look good in order to drive shares higher. Here, the point is to disparage the stock as much as possible to maximize a bet on the decline.