After What Short Sellers Did to My Company, I’m Cheering on WallStreetBets
The GameStop short squeeze campaign wasn’t wanton recklessness — it’s cause for hope
Give credit where it’s due: The WallStreetBets subreddit’s revolt against short sellers has brought global attention to a problem that has long vexed public company CEOs, myself included. The scrutiny ought to lead regulators to fix the countless issues caused by short sellers.
Short selling, in brief, is when one borrows stock, sells it at the current price, and then buys back the stock later to return the borrowed shares. They’re betting the price will fall, and if it does, they profit from the difference. This can play a useful role in the market: Theoretically, if a company is overvalued or engaging in fraud, a short seller could force the market to price the company’s stock accurately. Investors also use short selling to hedge portfolios and minimize risk.
In practice, however, short selling had led to far more nefarious behavior. Some short sellers don’t just sit back and hope that a stock declines. Instead, they try to force it down. It’s Wall Street’s open secret: There are a class of short sellers who target companies to destroy value. They operate in the shadows, whisper in the ears of business reporters, file lawsuits, and even call up government regulators — all to bring a stock lower and profit from the decline.
The GameStop Madness Isn’t David vs. Goliath — It’s Goliath vs. Goliath
Robinhood and Redditors are profiting off this. But they aren’t the only ones.
I know this because I’ve lived it. In 2004, the stock price of our company Axon rose dramatically — but that drew over $1 billion in short positions and led to a highly coordinated public relations and legal campaign against our company. Within months, press that ignored us began assailing us. We were sued over 100 times, and a federal government investigation was triggered that alarmed both our shareholders and customers, causing real damage.
Short sellers nearly destroyed our business, because doing so was lucrative for them. We survived by the skin of our teeth, and that…