Shorting a stock - Primer Shorting in of itself is not bad when properly executed, it serves a very import purpose. If the shorts think they can be effective in exposing investors to companies that are misleading them, it provides a check and balance. Many investors do not do enough DD and end up not understanding the true nature of the company. That is where short sellers provide the service to investigate and flush out these bad apples and temper the emotional exuberance of herd.
Shorts can provide us with an important and health skepticism to irrational exuberance to stocks. When they short a stock, it is generally with an objective insight to flush out a bad business plans or improper accounting. We have numerous examples, Sino-Forest and Hedge fund Muddy Waters that are exposing Chinese companies with accounting irregularities and severe corporate governance issues. Generally, when a story sound too good to be true, it usually is. If the motives of the shorts are not based on sound facts, their venture can prove catastrophic and result in the stock going parabolic when they attempt to cover a bad bet. So as with all strategies both short and long investors must exercise caution in getting to emotionally attached to any one stock.
We have a great opportunity with ORT that could prove explosive on the stock price This company has provided great detail to shareholders on its progress with the HPA plant. Given that we have set the bar with high expectations, if we achieve just the basic operation results, the shorts will cause ORT shares to explode well beyond the analysts $8-12 projection. When this happens the money itself isn't lost or made, it's simply transferred from one stock holder to another. It's like magic and the expectation has become real, and the more real it becomes, the more desperately they want it. Capitalism at its finest and we will soon know who the real winner is. GLTA