A group of 60 Chinese entrepreneurs, CEOs, investors and regional heads of global tech concerns including Microsoft and SAP has turned their collective fury on short seller Citron Research, arguing the firm is deceiving the market by finding fault in firms where there is none. The group launched an astonishing attack on Citron …
This stuff is hardly surprising.
"The letter then goes on to say that while some negative reports on Chinese companies listed in the US have “helped cleanse the environment”, the likes of Citron have “started targeting legitimate companies with either no problems or minimal problems”, and done nothing but tell bold-faced lies."
The technique of short selling, most particularly so-called "naked shorting" (where you simply borrow shares you are
fucking with investing in rather than having to pony up anything yourself), has a thoroughly pernicious effect given that it positively begs market manipulators/sharks to get involved. When in engaging in this type of "investment" the opportunities/temptations for fraudulent behaviour are so obvious that it is inexcusable that the exchanges have not yet banned at least the "naked" version of the practice.
Governments will never ban short selling, they make too much from it.
It would not actually need *legislation*.
The leading exchanges to could do it themselves in concert - it would after all demonstrate their commitment to honest markets (strives manfully not to howl with laughter at that thought).
That is not 'naked' short selling
In principle, shorting means selling shares you own in the hope that you can buy them back later when the price has fallen. Nowadays, this is done through options, and borrowing the shares that you are shorting has been standard practice for many years - but still someone has to own real shares in the business.
Naked shorting means doing this without you (or anyone else) ever owning the shares in question. Some people think this is an abuse of the system, and certainly if things don't go the way you hope and the share price rockets instead of falling, you're exposed to unlimited liabilities.
Re: That is not 'naked' short selling
With all respect I would be astonished if "naked shorting" was not involved here. What the complainants appear to be upset about here is behaviour that is not normally associated with people trading in shares they in fact actually own. The kind of manipulation/dishonesty they are alleging is usually found amongst the "naked shorters". That was in fact the point I was making when I said that that practice positively encouraged villainy. One can very clearly argue that there are entirely respectable reasons for conventional shorting, I have yet to see any convincing case for the "bare arse" version.
Re: That is not 'naked' short selling
You may well be correct, AF, and I wasn't offering an opinion on whether it was involved or not. I was merely pointing out that your initial description (borrowing stock) of what constitutes a 'naked' short is wrong.
@Chris Miller "Re: That is not 'naked' short selling" You are quite right. There was an.....
....... important word missing from part of what I wrote.
"(where you simply pretend to* borrow shares you are
fucking with investing in rather than having to pony up anything yourself)"
I wrote that one too quickly. :) Though in my own defence I will say that a short explanation of the practice is not the easiest thing in the world to write!
Naked short selling, or naked shorting, is the practice of short-selling a tradable asset of any kind WITHOUT first borrowing the security or ensuring that the security can be borrowed, as is conventionally done in a short sale. When the seller does not obtain the shares within the required time frame, the result is known as a "failure to deliver". The transaction generally remains open until the shares are acquired by the seller, or the seller's broker settles the trade.
In the United States, naked short selling is covered by various SEC regulations which prohibit the practice.
"In the United States, naked short selling is.................
.....................covered by various SEC regulations which prohibit the practice."
If that is the case I am delighted to hear it.
I find it intriguing that
Citron means lemon in in French. Anyone sees the subtlety here ?
...see title. Anyone who's ever seen anything from an "analyst" knows that the vast majority don't know their arses from their elbows, and there's no point even reading their stuff, let alone complaining about it. Just look at everyone who's been telling you to buy Facebook for the last 6 months.
And whining about shorting? For everyone betting that a stock will go down, someone else is betting that it will go up; that's how it works. There's no magic in it. If shorting actually *causes* a stock price to fall, then it's a sure sign that people were buying on sentiment, and not fundamentals, and those people had it coming.
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