How Public Short Campaigns Harm Product Innovation

The GameStop short squeeze at the beginning of 2021 has brought attention to a class of short sellers who launch high-profile public short campaigns (PSCs) to talk down a target firm’s stock. These activist short sellers, unlike traditional short sellers who often keep their short positions private, publicly denounce their targets and present evidence of specific allegations, such as accounting irregularities and product deficiencies, or they may simply allege that a target’s stock is overvalued.

The increasing prominence of these activist short sellers prompts debate on what roles they play in the financial market. Critics and, in particular, the management … Read more