2014 Review and New Year Resolutions

intuitive5191: Thanks for pointing out a possible issue with our web site. There is a direct link to the Policies page from our home page (top right). We are currently redeveloping our web site so I will pass your comment to those involved.

As regards the FCA resources, I think the problem is partly as you say that the resources might be misapplied but they do cover an enormously wide area, and the problems and legal cases in the financial sector have been rampant in the last few years - the banking sector alone has generated an enormous amount of work.

As regards the last point that may be a suggestion for Stockopedia to consider, but we are always willing to listen to proposed changes. The reason why it has not been revised since 2011 is mainly because there haven't been calls for significant changes. The last time we asked our members about this they were generally happy with it. We are however considering holding debates on some of the issues surrounding shorting which is a very contentious area and where there is no more unanimity among our members that there is on this board. There are also some other areas which could do with more debate, to enable us to refine our policies (there is of course nothing in the Policy document at all on "shorting" at present even though I did write it - we tried to promote policies that every sensible investor could agree with).

Roger

The FCA budget for 13-14 was £432 million employing 2848 staff. The link can be found here

The FSA (its predecessor) did have a larger budget of £578 million for 12-13, but the new FCA had their budget reduced because the FSA underspent by £19.5 million. I think that most people will read this as the FCA just not being very organised in using the resources it had at its disposal. No surprise really.

Having said this, 432 million and 2848 staff is still quite a considerable resource. Given that some of the alleged market abuses on AIM are quite visible, I would have thought that this was the obvious place to start investigations.

Thank you for providing the link to the ShareSoc Manifesto. I had not seen this before and took a minute to trawl the ShareSoc website to see why I had missed it. I have to say it's a bit buried. I would suggest that this document should be linked directly from the front page of your website as a clear statement of what ShareSoc is all about.

Might I also suggest that someone starts a thread here in on Stockopedia to discuss this Manifesto and provide valuable feedback? It's dated 2011 and could probably benefit from some revision. Even if people chose not to comment, at least they will have the opportunity to read it.

Good Morning Roger

If I may say so you appear to be at the at the back of the class if you cannot understand perfectly plain concepts expressed in clear terms!

If someone for purely selfish pecuniary reasons reveals , in public ,information that is important for investors to consider in deciding whether to hold shares in a quoted entity then that is ..a self interested public service.

I also expressed a preference for Quindelll directors to do serious jail time ...as opposed to shorting being curtailed. I fail to see how that constitutes an abuse of anonymity. It is also non defamatory.

Finally if this is your personal blog then remove any Sharesoc references , otherwise your ill thought through prejudices damage Sharesoc IMHO

intuitive6191: as regards your question on the ShareSoc stance on "market manipulation and how to protect the private investor", we certainly have a number of suggestions. The resources put into the FCA certainly need to be larger if they are ever going to tackle this issue. They simply do not have the resources to tackle all but the largest companies and the biggest issues. Any small company is simply not going to get any attention however many complaints there are or requests for investigation (and companies such as Quindell and Blinkx are nowhere near the smallest of course).

In the AIM market we would like to see existing regulations properly enforced and there needs to be an independent regulator because self regulation by the LSE simply does not work - they have a vested interest in sweeping problems under the carpet. Our stances on these matters are spelled out in our policy manifesto which is present here: http://www.sharesoc.org/ShareSoc%20Manifesto.pdf and we have promoted these to the Government and the LSE a number of times in the past.

rhomboid1: "Self interested public service"? What does that mean? And your comment about Quindell directors is defamatory unless you can produce evidence about fraud or other illegality which will stand up in a court of law . A typical example of bulletin board abuse of anonymity.

As regards whether the "views" expressed are mine or ShareSoc's, Mark Bentley has already made clear that any comments by me on ShareSoc's blog are my personal views. It clearly states that on our blog - see http://www.sharesoc.org/blog.html (see the heading).

But will everyone please note that the blog post made no comment on the ethics of shorting or took any general position on it. Will those at the back of the class please pay attention and reread what I said!

OK Roger ,you appear to be missing my point.

I accept there were shorting attacks on those three companies, you believe that is a problem, I believe it to be a self interested public service by those involved. I'd far prefer to see Quindell directors doing serious jail time than see shorting attacks curtailed.

As for anonymity on the internet it has advantages and disadvantages, drawing comparisons with "real life" ID requirements seems a pointless exercise though.

In the meantime please clarify whether these views are Sharesoc related or just your own views , if the latter then maybe lose the Sharesoc website link?

For avoidance of doubt, Roger's views on shorting and anonymity on electronic media are his own, and not those of ShareSoc. He has tried to make this clear. Note that the OP is signed under Roger's name. Roger is the author of "the ShareSoc Deputy Chairman's blog", which is republished by Stockopedia. As a member of ShareSoc's board, I am most grateful for the amount of work Roger puts into the blog, as it tackles many issues of interest to investors - whether you agree with Roger's opinions or not!. Opinion pieces on the blog can not be assumed to be ShareSoc policy.

I expect that we will discuss these policy matters at the next ShareSoc Board Meeting (there are 9 well qualified members of ShareSoc's Board - see http://www.sharesoc.org/directors.html ) and, if we agree a formal policy position for the Society on them, we will make that formal position clear.

To rhomboid1: There was nothing in the original post that said either I or ShareSoc are opposed to shorting, per se. Please reread it.

As regards pseudonyms, the big problem is that a lot of people use them because they do not wish to be openly associated with the views expressed. That often is for dubious or even illegal reasons. I cannot tell whether it is just people who are shy, may have some good reason to conceal their identity or motives, or whatever. But I do know if someone is using their real name that I can put a lot more trust in what is said.

National newspapers will never print letters from people who do not provide a name and address for the same good reason. But internet blog publishers have not learned that lesson yet it seems (apart from those who think trust is important such as Facebook). I doubt that we would miss much intelligent comment if those who were not willing to disclose their names were put off from posting. But it would certainly discourage the often libellous and unproveable garbage and downright abuse one sees all the time from the ignorant and reckless on bulletin boards.

I'm reading this thread in amazement, how can Sharesoc be opposed to shorting? It is probably the most efficient method of unearthing poor or catastrophic investments! If the shorters are wrong they are a transient flea bite on a healthy beast. However if a beast is flea infested its owners might like to ponder why.

I also cannot understand the antipathy to pseudonyms, I have and have had 'real world' roles that could easily inhibit my ability to post as openly as I'd like on issues on a variety of topics, a pseudonym can be associated with posting rubbish or stuff worth reading , as can people using their own names.

I've also huge sympathy with Jaknife , his crusade against the fraudsters over many years has been extraordinary, it cost some nasty folk cold hard cash and that is not without risk but to an extent a pseudonym can act as a first line of defence.

"If you want to convince people that shorting shares is bad you need to come up with an argument that is not based on the illegality of naked shorting, not based on the illegal actions of a very few individuals who may happen to be short and not based on your personal investment experience".

If a large hedge fund, with access to leverage, is able to short the hell out of a small to medium size company, then the target has little chance of fending off such unwanton interest - the power these funds now wield is out of kilter with what is healthy for a strong productive economy imo.

Shorting merely adds to the volatility and you've not really explained how the three scenarios are different - they all involve selling something you don't have, they all have the same risk/reward profile, they all have the same desired outcome.

Is it essentially because one is physical short, the other two are synthetic - is that why the latter two are not deemed as being naked shorts?

ie Similar to say buying a Put option into 5000 Shell shares. I'm effectively short, and whilst I might not own Shell now, despite going short ,if it plummets I can either sell the Put, or buy underlying in open market and exercise option.

Just saying

"I have no issue with you viewing both as bad as each other I just disagree with you, as does the law and accepted market practice. Your personal view doesn't change the accepted terminology though and using it otherwise is simply confusing. "

isn't really helping me understand the WHY.

"Regardless of whether you personally consider Edelman 'an obnoxious bully' it comes down to whether he was right or not as to where Blinxx revenue growth was coming from or not, given the subsequent performance of the business I think he probably was, hence my inclusion of Blinxx in that list."

Given Blinx is a reputational business, the brand took quite a pasting despite the professors comments being continually correct for factual errors. Small company, reliant on its brand, will always see its business affected - the falling sales were then used as evidenced that the business was dubious, the call supposedly vindicated. Rinse and repeat. Easy to do if you have the firepower.

Lehman was a no brainer. QPP I dont really follow as I wouldn't go near such a stock.


All for no reward? What of their remuneration arising from their employment - is that not good enough? (eg Research analysts at Goldman, JPm, BOA ML, or Journalists for that matter)

"This comes across as pretty naive for someone who has worked in the city. Why do you think IB's have a research dept.? It's not to do a civic duty. What happened to the Cannacord analyst that wanted to put a sell rec on Quindell? What happened to all the IB analysts that called the tech bubble?"

Naive? Have you not heard of Terry Smith then? IB's have research depts for a variety of reasons and I'm sure that they're not all as acquiescent as your Canaccoord example. For starters they were renowned for putting out negative pieces on conpanies where they'd lost out on contracts with. There's also the "In house" use of research, either for trading desks, or Fund/Wealth management so again such research pieces are unlikely to be carte blanche positive - pitfalls and negative outcomes would certainly be pointed out.

For avoidance of doubt I'm not talking about the dross that the likes Edison, Canaccord, FinnCap, Peel come out with - tier 3 operations that they are, but the bulge bracket firms whose analysts have, in the main, far better reputations. At the end of the day as I'm sure you're aware, most FM's for example take the research from 1-3 analysts,two they deem the most consistently capable, the third they like who comes up with decent off piste stuff , the rest gets binned because there is simply too much of it.

Again, you need to read this in the context of my prior comments of the City is not how I remember it, it has morphed into a rather unwholesome beast that leaves alot to be desired.I quit the City in 2007 having done my time. Perhaps this might explain my old fashioned views of the City.

What of journalists? Plenty of them scratching about for dirt on XYZ plc. And they'd not be averse to revealing all was not well


"At the end of the day I don't think we'll ever agree - you think shorting has cost you money, I think it's a valuable tool to balance my mostly long portfolio."

Ah so you use it as it was intended. A hedging tool. No issue with that at all.

And no I dont think it has cost me money , I know some of the dubious shorting antics has, for a fact , cost me money in short term - but seeing as they're long term holdings I am able to ride it as I keep such forays outside the FTse350 to a minimum. Many other investors however are not so fortunate.

Interesting chat however.

Cheers.

Hi Fangorn,

I have no issue with you viewing both as bad as each other I just disagree with you, as does the law and accepted market practice. Your personal view doesn't change the accepted terminology though and using it otherwise is simply confusing. Using the illegality of naked shorting and your view on it's similarity to spreadbetting to argue that both are wrong completely misunderstands why naked shorting is illegal which is maintaining the integrity of the market in delivering shares on time as per settlement. This is not an issue with spreadbetting so cannot be used as an argument against shorting in general.

If you want to convince people that shorting shares is bad you need to come up with an argument that is not based on the illegality of naked shorting, not based on the illegal actions of a very few individuals who may happen to be short and not based on your personal investment experience.

Regardless of whether you personally consider Edelman 'an obnoxious bully' it comes down to whether he was right or not as to where Blinxx revenue growth was coming from or not, given the subsequent performance of the business I think he probably was, hence my inclusion of Blinxx in that list.

All for no reward? What of their remuneration arising from their employment - is that not good enough? (eg Research analysts at Goldman, JPm, BOA ML, or Journalists for that matter)

This comes across as pretty naive for someone who has worked in the city. Why do you think IB's have a research dept.? It's not to do a civic duty. What happened to the Cannacord analyst that wanted to put a sell rec on Quindell? What happened to all the IB analysts that called the tech bubble?

At the end of the day I don't think we'll ever agree - you think shorting has cost you money, I think it's a valuable tool to balance my mostly long portfolio. Like everyone else we are aligned to our economic interest.

Danger

"because you don't see the difference but the law clearly does (and for good technical reasons which are nothing to do with seeking to profit from downward price movements.) "

But what is the difference? Other than one involves using a derivative to mimic the economic effects of shorting something one doesnt own, the other involving directly shorting the asset in question(without owning it) You mention technical reasons - what are they other than the point I've highlighted. Surely the Spreadbet/CFD is merely an "instrument" being used to legalise what is in effect, the same action?

I can't see it. To me they're both as bad as each other regardless of whether one is illegal,and the other is not.

"But sooner or later you will get into hot water yourself if you seem to be accusing people of illegal activities based on your personal definition not the law's."

Distasteful activities, of comparable nature. Don't think I actually claimed they were illegal, just that I believed they were no different to outright naked shorting - we really have taken a leap if you think that constitutes me accusing traders of such products as engaging in illegal activities :)

"The problem with that idea is that you are expecting people to do significant amounts of research, spend money to investigate (it's not easy to detect fraud) and then take significant personal risk (corporate fraudsters are notoriously litigious and English libel law is badly structured) all for no reward. It just doesn't happen without incentives."

All for no reward? What of their remuneration arising from their employment - is that not good enough? (eg Research analysts at Goldman, JPm, BOA ML, or Journalists for that matter)
Surely they are merely fulfilling their job description which they get paid for. I'm pretty sure Terry Smith is not alone in focusing on "the truth" rather than what he has been incentivised to say. And what of those bank's analysts who are no longer pitching for the target companies business - they'll scribble as cutting a report as possible surely highlighting all the problems

But instead we have hedge funds taken a short position,then paying a harvard professor to write a negative piece, which he does,publishes, and doesnt disclose that he was paid by two shorting hedge funds to do it . Is this the kind of incentivisation you find acceptable?

In case you werent aware, Mr Edelman has been in the press again, fairly recently.

You can choose your source according to personal preference.

http://www.theguardian.com/us-news/2014/dec/09/a-c...

http://www.dailymail.co.uk/news/article-2871466/Ha...

http://www.telegraph.co.uk/news/worldnews/northame...

So not only is he lacking in probity by not disclosing he was paid for "negative research" by the very people who had already shorted the stock in question, he is also clearly an obnoxious bully.

"Sophisticated investors don't buy these sort of companies (at least not without the understanding that they are playing a greater fool theory) it's the ill-informed PI's. If you ban short selling nobody is going to publish their concerns they are just going to keep quiet and the PI's will bid the shares up higher and lose more money in the end"

When you say "these sorts of companies" which ones do you mean? I tend to buy mainly Ftse100/Ftse250, but occasionally stray into Aim, Oilies mainly,odd miner for my sins. And Blinx.Other than that I avoid small companies like the plague as theyre too easily manipulated by anyone with deep pockets.

Plenty of institutional investors in Blinx, from some reputable houses as well.

http://investors.morningstar.com/ownership/shareho...


"for the avoidance of doubt I don't consider Blinxx, Quindell, Lehman Brothers and other overleveraged banks full of illiquid assets as good companies"

For the avoidance of doubt I don't disagree with your comment immediately above, other than the inclusion of Blinx.

Hi Fangorn,

Again you can use your definition of 'Naked Shorting' to include spreadbetting etc. because you don't see the difference but the law clearly does (and for good technical reasons which are nothing to do with seeking to profit from downward price movements.) But sooner or later you will get into hot water yourself if you seem to be accusing people of illegal activities based on your personal definition not the law's.

Following the LIBOR scandal etc. I have sympathy for the view that there are the people in the city who are behaving consistently unethically however it's hard to see standards declining massively when in the past you had people legally front-running orders etc. However none of these issues are directly related to shorting shares they are just general concerns, valid but general.

I don't see the need for short seller research,nor short selling activity that exacerbates price volatility to achieve the aims you highlight. Surely all that is needed is to point out the potentially corrupt management, or the poor product and let market forces sort themselves out...

The problem with that idea is that you are expecting people to do significant amounts of research, spend money to investigate (it's not easy to detect fraud) and then take significant personal risk (corporate fraudsters are notoriously litigious and English libel law is badly structured) all for no reward. It just doesn't happen without incentives. Sophisticated investors don't buy these sort of companies (at least not without the understanding that they are playing a greater fool theory) it's the ill-informed PI's. If you ban short selling nobody is going to publish their concerns they are just going to keep quiet and the PI's will bid the shares up higher and lose more money in the end.

Again no one has managed to produce an example of a good company damaged by short sellers - for the avoidance of doubt I don't consider Blinxx, Quindell, Lehman Brothers and other overleveraged banks full of illiquid assets as good companies.

Cheers,

Danger

Hi Danger,

Thank you for your response.

So correct me if i am wrong but in the three examples given,

1) Selling the Asset short, say Shell shares, without owning them is "Naked" short selling.

But

2) Selling Shell shares via Spreadbet, or via a CFD, despite not owning the underlying shares

is only considered shorting because you arent actually "Selling the Underlying Asset", you're essentially engaging in a synthetic short, namely " A derivative into that underlying asset" that mirrors the economic effect of a naked short without being subject to simialr stringent rules?

From my own PoV all three involve no ownership of the underlying, have the same risk/reward payoff for going short in that you hope to buy back cheaper in all three instances, the only difference being in how "The trade" is packaged.

I dont think your analogy however is , in any way, comparable, as at least in the above scenario the underlying elements of ALL THREE trades is the same. All that is different is how the latter two are packaged. In your example I'm strugglign to see any link whatsoever in how you could logically define a Bulgarian to be those who are born in Bulgaria, or who have the avatar name Fangorn. The second assumption would seem to be non sequiturial to the first.

"Re: short/medium term damage to employees and suppliers I struggle to see how this could really happen when a good company is shorted even when there are false rumours. Again I think the onus is on you to produce an example where this has actually happened otherwise we are hypothesising generalities. "

I'm sure you'd agree that even banks/employees watch the news and are aware,in this global 24/7 news society we live in, are aware of extreme share price movements in various companies. With regard to your specific question of providing examples - as I'm sure you're aware evidencing my hypothesis is difficult as it's hardly likely that a company will announce its cutting back on an investment project as a result of its stock plumetting 20%, due to shorting activity. You request would also entail going back over my extensive notes trawling for companies that suffered 1) Excessive stock price volatility, 2)Comparing it to known "Shorts" in that company at the time, 3) Dissecting the news to glean how much investment /restructuring was put on hold as a direct result. A tad time consuming at the bare miminum.

But I pose you this question - a company with an extremely volatile share price, particularly in a seeming downward spiral (even the mere mention of raising funds for an investment project sees the shorters sharpen their knives and 5-10% fall ensues), would surely see its cost of capital elevated as its "risk" was percevied to be rising? Bankers/Creditors are not daft. If the share price is falling rapidly there must be a reason, ergo the risk must be compenated for via more stringent & costly terms for any loans/refinancing.

Most blue chip companies rely, on an ongoing basis, for significant debt refinancing/ongoing capital raises to finance their investment plans - such activity is not just the preserve of financial weak AIM companies. So, in the face of rising cost of capital these investment projects are quite often delayed, to the detriment of the headcount already in place, but also of potential future hires/training etc etc. There are plenty such short to medium term costs to perfectly viable businesses - proving it however is difficult.

Things are even worse however for smaller companies where these large financial hedge funds, leveraging up their already huge financial advantages, can essentially blow any small company out of the water, rumour or not. Is this healthy for a viable and prosperous economy? My opinion is that it is not.

"The issue I have is that by criticising short seller research (i'm referring to the likes of Gotham, Edelman, Hempton etc. here not the BB muppets) sharesoc seem to be coming down on the side of the bad managements that implement unsavoury business models, destroy shreholder value, overpay themselves, and do related party transactions."

The issue I have is much of Edleman's blog comment was incorrect - hence he had to alter the contents of it on numerous occasions as new information came to light,and his prior remarks were shown to be factually incorrect. The damage had been done however.

What was more galling though was that he didn't disclose he had been paid, to do the research , by the very shorters who had already positioned themselves.

"The more high quality true short seller research attacks poor, promotional or potentially corrupt management the better for investors and the country since the more capital will go to good companies that are innovating and creating jobs. Sharesoc should be behind this not against it."

I don't see the need for short seller research,nor short selling activity that exacerbates price volatility to achieve the aims you highlight. Surely all that is needed is to point out the potentially corrupt management, or the poor product and let market forces sort themselves out - Holders of the stock WILL SELL, and the company, when it seeks new capital, will not be able to do so. Capital will therefore go to good companies, as you say, who are innovating and creating jobs. Doesn't need Short sellers at all who merely speed up the process,and cause significant contagion at the same time.

As an aside perhaps it would be an idea for a tabulation of "bad managements" as no doubt each new generation of investors is not aware of the "dubious charlatans" that the prior ones are.

As I said, having worked in the City it has changed beyond all recognition to how I remember it when I joined, it's far less honourable, its participants of far more questionable probity - one only has to review the various price fixing revelations that we see from Libor, to FX to doubts over Gold. Which commodity/market is not affected? How many more skeletons are there in the cupboard yet to be revealed. These days they'd sell their grandmother, and the shirt off their colleagues back, if it secured them an extra bonus.

Case in point is my own situation where I've had a "financial institution" try to pull the wool over my eyes with respect to a currency translation from USD to GBP.

10 weeks and I'm still waiting for the bastards to tell me what Cable rate they used, despite asking five times at least. But silence - they'll answer most other questions with flannel, but just blatantly avoid the Exchange Rate one.Why - because they're trying to use their "Internal exchange rate" they decided upon at the beginning of the year despite my transaction happening in November! This internal exchange rate results in an immediate 5% capital loss on my part!!!! Which is, shall we say. an utter piss take.

@Jaknife,

For the record it was (a) death threats and (b) false accusations to my employer as well as (c) the aerial photos.

Have to say I disagree with Roger in regard to this, despite sharing his concerns on the shorting that goes on.

I also suspect I'd be handing our far more severe sentences for such death threats/ false accusations to employers.

Where the perpetrators caught?

intuitive6191,

For the record it was (a) death threats and (b) false accusations to my employer as well as (c) the aerial photos.

Roger,

Words escape me. You don't understand my concern about me having aerial photos of my house posted on the internet? When I have a wife and two small children (7 and 5 back then). When I had a track record of highlighting fraudsters, boiler rooms and other financial crime over on TMF?

I note your lack of understanding. That would be another blind spot to add to the one identified at the start of this thread.

JakNife

Sending somebody a photo of their house suggests that you know where they live. There are many situations where this could be construed as a threat.

As regards Emptyend's comments re abusive emails etc, there is a perfectly good set of legal remedies both in civil and criminal law, and the police have been active of late in pursuing such cases - see http://www.harassmentlaw.co.uk/book/ch2.htm for the background. Certainly sending death threats would be a criminal offence. As regards photos of your house, as aerial photos of almost all UK houses are now available from Google, I am not sure why anyone would see that as a particular threat.

Telling lies to make money from shorting is wrong and is already illegal.
However it's ironic for Roger to think that companies have "no adequate legal remedies" for libels from shorters. The playing field is tilted, but toward companies, who can and do use shareholder's money to bring libel actions, and discover the identity of any poster if justified. In contrast it is too expensive for retail investors to bring directors to court for lies and embezzlement.

More simply, Naked Shorting is selling stock you are unable to deliver.
[Peel Hunt have sold me some stock they have been unable to deliver for almost a year now, and there's no easy or good remedy (including forcing a buy-in)].

Normal Short Selling is selling stock and fulfilling delivery by borrowing the requisite quantity.

It's really not worth obsessing about the sequencing of buying and selling. Sometimes you'll buy before selling, and sometimes you'll sell before buying. No big deal in a commoditised market.

Naked shorting is extremely rare in the UK market because generally it's very difficult to do. The most significant example that I recollect is that of Room Service Group where the broker Evolution Beeson Gregory short sold 252% of the stock with the expectation (but not a firm arrangement) of being able to cover their short:

http://www.fca.org.uk/your-fca/documents/final-notices/2004/fsa-final-notice-2004-evolution-beeson-gregory-ltd

EBG were fined by the FSA, as was the individual involved, and shareholders were compensated - evidence that the regulations work?

But have you ever sat down and thought about the short to medium term damage that all those involved actually do experience before said company recovers?

Yes, and it's hard to find much.

By and large normal companies are not operationally dependent on their short-term share price so for employees, customers and suppliers a short raid on a good company will essentially be a non-event. Most will never know about it.

For shareholders, girations in share prices are part and parcel of investing, and many will be able to profit from the bargains. The main problem is perhaps naive or uneducated investors who feel compelled to sell at the wrong time, but then this gives them a wonderful opportunity to improve their risk management practices and become better investors. Anyone who is so fragile as to feel hurt by a short raid on a single name will sooner or later be smashed to pieces anyway. Short episodes on single names are easily diversifiable and thus a pretty minor occupational hazard for an investor.

Fanghorn,

I don't short. I don't trade with money I don't have. I don't use leverage.

You are not alone sir. I share the same stance.

While I don't short, I don't have a major problem with it as a market instrument. However, I do think the regulators need to get more of a grip on organised shorting campaigns (or organised pump and dump campaigns for that matter), especially those that involve the spreading of false rumours and lies.

I think the bigger problem here is the use of leverage by unsophisticated retail investors. In my opinion, this is far more damaging to wealth creation than shorting. I have witnessed time and again people getting wiped out using spreadbetting, particularly with popular smallcap/retail shares. Of course, there are those that have made a lot of (tax free) money out of such instruments and know how to cover their positions and handle margin calls. Alas, a lot of people don't do this very well. The net effect is that it can create a domino effect and send shares into oversold territory pretty quickly - which I guess does present a buying opportunity for others. I agree it's a market dynamic but I dislike it. Increasingly, I am moving away from shares that are popular with retail investors for this reason.

Cheers
Simon

"I agree entirely. I am currently experiencing the impact of nutters in a non-investment context and there seem to be no checks and balances on what those nutters might do or threaten. This is also something which should be taken much more seriously by the authorities!"

Sorry to hear that EE - there are indeed plenty of such nutters around and perhaps ending anonymity forcing "everyone",no exception, to post under their own name, is the way forward. Quite how that is managed, who knows, but ith technology advancing so rapidly it's surely only a matter of time.

Whilst not in the same league clearly as your own position I have been subjected to the attentions of a stalker since 2012 - multiple avatar names on Advfn, some attempting to impersonate me so as to stir and cause,trouble, one even to rabble rouse and subject me to potential litigation given what and the tone used to scribble what they did.

The amusing thing is the stalker is question had his own identity,and address leaked - something which the obnoxious pottymouth is still fuming about. I've apparently got a "court summons" in the post from said individual since mid last year. No sign of it yet. Nor even sure why one would be coming unless retaliating in kind is deemed worthy.

I empathise with your predicament and share the view that such behaviour should be taken far more seriously. Still, I bet the Police force are far too busy chasing down Katie Hopkins for her sweaty jock comment ......

@Jak,

I feel the same way about blatant ramping with unsubstantiated rumour mongering/twisting of evidence.

"Spreadbets and CFDs are equally possible for long positions. If you have some sort of problem with these instruments for shorting then it must naturally follow that you have the same problem with these instruments for "longing" "

If it's not hedging an underlying position then Yes.
I will, at some point, be looking into covered calls (for hedging purposes clearly)

I'm very much against trading "on margin", and plenty of volatility is derived from those using such leverage products on margin, the T-20's etc etc.

So I beleive I'm pretty consistent.

"My argument would be that I see vastly more ramping than "deramping"; hence IF what you say is true then the problem that you've chosen to highlight isn't with shorting per se, but the problem is with people spreading false rumours."

TBH I've seen plenty of ramping as well, which i find very disasteful when its not evidenced and quickly proven to be utter lies. Such behaviour seems to be mainly the preserve of the AIM market so I'd be inclined to more closely regulate it or even close it down. Far too many charlatans on both sides of the fence imo.

And not to detract from intuitive6191's point:
"can anyone name a good company that has been brought down by shorting?"

To which my answer would be - very few, if any,in the long term.

But the damage done in the short term to companies that have subsequently recovered has never been quantified. And there is no disputing that plenty of damage is done - not only to the company, but the lives of its direct employees and those who rely on it for their own businesses. All so the City spivs and their like can get their 30 pieces of silver.

Can't say I find earning a living that relies on such practices that attractive.

I'm a long only investor (and trade in and out of the positions I have depending on circumstances)

I don't short. I don't trade with money I don't have. I don't use leverage.

If I like a company I buy it. If I subsequently think it's product is not up to scratch, or its struggling, I sell what I have and call it a day. Once I sell a stock I no longer comment on the BB concerned unless there's a useful link to a story just published.

I dont change my opinion on a stock depending on what the time of day is,and which way the wind is blowing(or whether I managed to buy the dip/sell the peak that morning)

I must be a dinosaur as it seems most don't share my opinion.

I'll be brief on the topic of shorting:

1. Shorting good, in that speculators should be allowed on both sides of any market.

2. Market manipulation bad and illegal (and should be much more actively prosecuted!).

That's all I'm going to say on it. I don't short-sell personally but if people want to do so without simultaneously spreading lies and disinformation then that is absolutely fine with me!

With regard to JakNife's comment.....

And as to anonymity on the internet. The internet is full of nutters who will (a) send death threats, (b) post aerial photos of your house and encourage others to visit it, and (c) send letters to your employer demanding that you be sacked. Once you have experienced those three, as I have done, you too will want the ability to post anonymously.

I agree entirely. I am currently experiencing the impact of nutters in a non-investment context and there seem to be no checks and balances on what those nutters might do or threaten. This is also something which should be taken much more seriously by the authorities!

Interesting discussion. To move it along - can anyone name a good company that has been brought down by shorting?

@DangerSimpon,@PP

"I'm not sure you understand what 'naked shorting' is."

You may well be correct but I'd say it's selling something "You Don't Own" whether you have borrowed it or not!

Having never engaged in shorting, nor have I infact dabbled in Equity derivatives to hedge my underlying long positions as I know some do (eg Covered Calls) perhaps you could enlighten me as to at which point the following strategies entail actually "OWNING" the stock.

For the avoidance of doubt, being old fashioned, having traditional values borrowing something from someone to then sell to a third party is not owning it.

1) Selling RDSB 5000 shares on a spreadbet.

2) Selling RDSB 5000 shares via CFD

Surely these two dont entail taking ownership of the underlying to engage in the sale trade? Naked short surely? Perhaps you could correct me if I am wrong in this assumption as I have never engaged in either. Many do this, using margin, and with the additional leverage they are able to take advantage of, magnify the likely outcome. Useful and profitable if accompanied by dubious tabloidesque reports hitting the wires.

As PP says

"These days short positions are taken using spread bets or CFDs. So all I do when placing a short is to ring IG Index, ask for a quote on xyz plc, they quote me both a buy and a sell price, then I simply state whether I want to buy or sell, and the size of the position. If I sell, it's a short position"

PP goes on to say

"In reality, short sellers act as a necessary, and valuable brake on stock prices becoming too excessive, and thereby preventing market crashes. Problems are nipped in the bud, before they get out of hand."

Surely people holding the actual stock selling would be a valuable brake on prices becoming too excessive. So why the need for short sellers to perfrom a function underlying holders will? If the company is dodgy underlying holders sell, price falls. Problem flagged.

3) Hedge Funds et al"borrowing stock" to then sell.

"If someone posts some false information on any share, then shame on them. But it's quick & easy to disprove false information when they concern good companies. Shorters don't go after good companies though - they target weak companies, where the stock price has been inflated way beyond commercial reality. As such, they are doing the market a vital service. "

As you are aware, there are "Lies, Damned Lies and Statistics"

Whilst the publication I am mainly focusing on skirts very close to the line, they dont engage in outright lies - what they do proffer however is half truths mixed with fact, all couched in alarmist tabloidesque language - the aim being solely to frighten the average retail punter. You only have to look at the stocks that particular person focuses on - the retail punters favourites. Most investors are pretty unsophisticated so any mention of "Junk rating" will send them rushing for the hills, even if 95% of companies in the same sector are similarly junk rated. It's this subterfuge I dislike. Compare Shareprophets regular dross where opinions are changed depending on which way the wind blows(even if the underling facts have not changed) to say the research of Goldmand, JPMorgan, RBC. One's profesional, the other is no better than a tabloid.

"There are so many hedge funds and private investors that have short positions and very few 'smears' - in fact the ones people always mention are the very companies that usually end up worthless - so the idea that most shorters are spreading lies is patently false."

Yes Danger, poor use of the word "Most". Perhaps substituting it by "a fair few" might have been more precise.

I do though have much sympathy with Rick's

"Even less so if the shorter is a multi Billion $ hedge fund, which takes a position prior to releasing some "research" report on a company. Is it any coincidence that the stocks they choose are heavily held by retail investors? This is market manipulation of the worst kind IMO."

Which is EXACTLY what happened at BLINX. And Edelman did , in fact, have to consistently update his blog given its factual errors thorughout the first few weeks of the affair nor did he reveal he had been PAID for the research by those very same hedge funds. Behaviour not associated with someone in such a position of responsibility imo.


Two comments I found particularly interesting which, to me, epitomise the moral decline of both this country and society in general...

"I am not aware of any good, fundamentally strong and successful company that has been brought down by the activities of short sellers, acting individually or in concert. Sure, the attacked companies take body blows, but eventually they rise and see off the predators"

"Shorting attacks will also provide wonderfully cheap buying opportunities in good companies, as happened recently with Optimal Payments (LON:OPAY). Far from moaning about it, longs should have been celebrating the profit potential, as I did (described in more detail above)"

Whilst this may be true in the long run, what of the short term consequences of such body blows, and the mid term ones before eventually said company gets its mojo back.

The impact arising from what is, often, a legitimate company with a decent product merely suffering from a black swan event. Movements are exacerbated these days as the algorithms,and programme trading go into overdrive.

What of the knock on effect of a coordinated shorting campaign on the make up and morale of a company's workforce. Who cares about the employees eh,as long sa we get our thirty pieces of silver.

What of the shareholders faced with massive short term gyrations in their wealth - not everyone has the deep pockets you seem to have PP where you can take advantage of such dips as the one at Optimal payments.

Rick's comment
"Let us not kid ourselves, if a company has a significant problem then investor selling will cause an equally bad loss for "long" investors who refuse to wake up and smell the coffee. There is no need or requirement for short selling per se. And it attracts dishonorable individuals who profit from shouting "fire!". "

For me this rings true. The reason such attention if not focused on the larger companies is because they're too large, too liquid, and have too many Institutional investors whose holdings dwarf those of the retail punters. No easy money to be made there.

Having worked in the City I believe things have got out of control - the lack of probity is shocking. The twisting of the original intentions of new financial instruments from a hedging instrument into a geared trading product startling and worrying. Case in point being Credit Derivatives and structured assets. What was initally conceived as a hedging product(to hedge underlying positions or secure exposure snythetically to risk positojns one wouldn't otherwise be able to attain due to internal loan restrictions or similar has morphed into a fuly fledge speculative trading product, the peak being all those Collaterised mortgaged backed securities being spliced and diced and sold in various over rated tranches.


But that's just me. As i said I very much miss the days of "My word is my bond" - these days you have to tie down every detail otherwise someone tries to screw you over. And even when you do tie down all the details the financial institution involved obfuscates, is evasive, engages in disinformation, and still tries to screw you over. Utterly unbelieveable.

In my view ramping and “pump and dump" has always been a much bigger problem than shorting. Unfortunately it's much harder for the average Joe investor to spot ramping and attribute the loses they make to such an activity – so the scale of the problem is rarely understood.

Some of the pumpers are now quite sophisticated so I doubt that they will be worried about ShareSoc's proposals for greater transparency on social media.

If ShareSoc wanted to protect relatively inexperienced investors from ramping then they could produce an investor's guide on how to identify subtle ramping and to avoid its consequences.

In my view this would be far more helpful than discussing shorting.

A fool and his money are soon parted seems pretty apt for this discussion. I follow a couple of rampers on Twitter and you can see their coordinated push on getting shares to spike, which they invariably do and I am sure they make a killing out of this practice. No one gets the hump with them, taking it as a lesson learnt not to blindly follow these rampers.. When a couple of people create a short attack and people cry fowl?

Bottom line people need to know what they buying and why. If there is a short and the price drops 30% when your research told you it's a good stock then double up get in or whatever you need. Genuine Shorters and longers make a market, unfortunately there too many who talk a fantasy game online that's the problem...

I am not aware of any good, fundamentally strong and successful company that has been brought down by the activities of short sellers, acting individually or in concert. Sure, the attacked companies take body blows, but eventually they rise and see off the predators. There are plenty of examples of companies where investors and management have shouted foul play, such as Lehman Brothers and Bear Stearns, But on closer examination by regulators, commentators and analysts the judgement seems to be that the companies were rotten in the first place. The shorters did not cause their eventual demise.

So until someone can give me an irrefutable example of a good company brought down by focussed short attacks, I will continue to believe that taking a short position is only a mirror image of a long position, both necessary for the making of an efficient stock market.

Thanks,Randomambler.

Whilst I think it ethical to go short an index, commodity or a highly liquid asset, for portfolio protection or diversification. I think it is not OK to short small-cap, or iliquid shares.

Even less so if the shorter is a multi Billion $ hedge fund, which takes a position prior to releasing some "research" report on a company. Is it any coincidence that the stocks they choose are heavily held by retail investors? This is market manipulation of the worst kind IMO. Clearly no level playing field exists. These activist hedge funds cannot operate in this manner any longer in the US so they choose lightly regulated markets elsewhere in Asia and the Europe (in particular the lightly regulated UK-AIM market), where there is no legal recourse for the companies to complain to US regulators or take legal action against the US-based shorters. The FCA should have taken action on this unfair practice long before now, because it has already brought the LSE, and AIM into disrepute. It has the potential to bring down the AIM market and make it a market that is uninvestable (paradoxically, just after the UK government made it OK for little old ladies to invest their ISA/SIPP money).

The situation is summarised well by Grant Henning (investment author/US investor)

"However, my chief personal objection to shorting individual stocks is that seeking to benefit from the losses of others has little socially redeeming value. It distresses me that some hedge fund managers have been permitted to buy naked shorts with little collateral and thereby to play havoc with our equity markets. Unless serious controls are imposed on shorting activity, such as enforcement of the uptick rule or suspension of margin availability, massive hedge fund shorting can seriously destabilize equity markets—to say nothing of the potential that shorting has to destroy individual companies wrongfully. Shorting also provides motivation for dishonorable individuals to spread false rumors about companies in order to drive their share prices down. This to me is like shouting “Fire!” in a crowded theater." -- Grant Henning. Extract from his book.

Let us not kid ourselves, if a company has a significant problem then investor selling will cause an equally bad loss for "long" investors who refuse to wake up and smell the coffee. There is no need or requirement for short selling per se. And it attracts dishonorable individuals who profit from shouting "fire!".

I agree with Paul.

The market as a whole is materially biased to long comments rather than short comments. On a regular daily basis I observe outrageous ramping comments for often fraudulent companies that have their share price propped up by crooked brokers with paid for "speculative buy" notes.

On the other hand I see no significant instances of genuine "shorting attacks". What I do see is people complaining and moaning that someone has published a negative opinion that they don't agree with and then stamping their feet that "it's not fair, not fair". Rarely (never?) do the same people ever complain when the house broker is paid money to write a puff-piece buy note with an unrealistic astronomical price target.

And as to anonymity on the internet. The internet is full of nutters who will (a) send death threats, (b) post aerial photos of your house and encourage others to visit it, and (c) send letters to your employer demanding that you be sacked. Once you have experienced those three, as I have done, you too will want the ability to post anonymously.

Happy new year,

JakNife

Sorry,TMF ?

Fangorn,

OK, so it sounds like there's plenty we agree on actually.
Although I do think you're being extremely charitable to Blinkx. They could have shut down the shorting attack quickly & easily by being transparent about where their profits come from, and how their business model works. They didn't do that, so by implication customers seem to have drawn their own conclusions & departed. That's nothing to do with reputation or attacks from shorters, it's down to the company's own failings.

If you deliver a service to any customer which they find valuable and worthwhile, then that customer won't take the slightest notice of any negative blogs. It's only when negative blogs highlight things that are wrong, that customers start to melt away.

As I understand it, Edelman has only amended his article for specific points that were incorrect, but the main thrust of his attack is intact, and looks to have been correct - as customers have voted with their chequebooks.

People who get an investment wrong always want someone else to blame, and it amazes me how such investors remain loyal to the people who led them up the garden path in the first place - i.e. the company.

There may be some value left in Blinkx if they can do something clever with their cash pile, but from their recent financial results, the original business model (whatever it was - it was never properly explained, funny that!) looks shot to bits, and probably loss-making by now.

Bulletin boards generally are full of liars, talking up their own book. So I'm amazed you give them any credence! I don't - I treat them with the contempt they deserve (talking about the advfn boards now). Whereas TMF and Stockopedia are havens of tranquility & generally decent/pleasant people. But even here, everyone will just talk their own book 90%+ of the time. So take it all with a pinch of salt, is my view. Apart from posters that you know, and rate highly. People who lie & talk nonsense are quickly exposed - I have a zero tolerance policy on advfn and have filtered hundreds of people, so I don't waste my time reading their nonsense. Although it is sometimes quite fun to wind them up. I know I shouldn't, but it amuses me.

Regards, Paul.

"The way I see it, there is a massive industry designed to pump shares to the gullible public - brokers, PR cos, commissioned research, tipsheets, the press, etc. Plus the worst culprits are that gullible public themselves - i.e. bulletin boards where, what 98%, 99%, or even more of posts are bullish. Where dissenting opinion is aggressively chased away. What is the end result of this? That gullible punters are separated from their cash, by usually buying into story stocks that have little substance."

Dont disagree with those sentiments at all. I've worked in the financial industry for 15 years, and had dealings with financial institutions since and I can say, hand on heart, I've never come across an industry with such a vast array of disreputable business practices..

But there's constructive "dissenting" criticism, or the outright lies and smears dressed up in hysterical language that I have an issue with. Half the dross on Advfn for example is outright lies,most of which any company will never be aware of.But it'll cause serious reputatiuonal damage nonetheless. And the smaller, then more illiquid such companies are, or the greater the percentage of stock held retail, the easier it is to manipulate price movements.

"On the other hand, short sellers will occasionally spot a company where there are serious question marks, and will ask questions, hard. In the 3 cases mentioned in the article above by Roger, the shorters have been overwhelmingly vindicated. Those shares didn't drop because of scurrilous blogs, they dropped because the companies themselves have things seriously wrong with them."

It's progressed further than that - now it's a case of setting up the short positions, then spreading malacious gossip., or anything that results in brand image damage and (the resultant prophesy of "It's a crap company" coming to pass as sales are hit )

Blinx is a perfectly viable business. The harvard professor, the so called Sheriff, has been shown to be not only "subjective",(given his paid for reasearch by the very hedge funds who'd already shorted) but also out of his depth,as the numerous rewritings of his blog illustrated as the arguments developed and it was shown he was reaching, in most instances. The brand damage though was very real and we see that in the subsequent figures allowing Shorters to claim they were validated.

QPP I dont follow - but the "Director share sales" were always a red flag for me. As was the "accident insurance/legal claims nature of the business. Been burned in similar before, Accident Exchange I believe it was.

Globo I looked at, saw a presentation or two up in town but just couldn't see how it'd make money.Too unbelieveable.

Most of the stocks I look at are either Blue Chip Yielders(a la Invesco/Woodford) or Oilies.Those with a divi particularly are preferred, but I'm not averse to some wildcat explo, but the sector is fraught with charlatans, blue sky promises and plenty of disappointment well side before one considers the lack of probity of the countries being operated in.

"If shorters attack a high quality company (which they generally don't), then the shares just rebound almost instantly, as informed buyers hoover up the cheap stock."

Not sure I agree with that - plenty of blue chip companies have been "targetted by shorters" most notably when TU's come in marginally below expectation or there's been some report of dubious quality across the hnewswires...then you see 20%+ intra day moves as the vultures descend.

"I've not looked into GKP, and have no opinion on it."

Roger's comment
""It is clear that on the internet there is rampant distortion of the facts by some commentators, much of which is libellous but where there are no adequate legal remedies for those attacked."

Could not be closer to the truth if he'd have tried.

I've seen some blatant lies in my time, and continue to do so on Advfn where posters claim, with absolute certainty, for example, that SBRY are getting 30% margin on petrol sales, or that Syrian sanction will be raised by christmas, but nothing has come close to the dross on GKP over the last three years.....

QPP I will defer to your/NigelPm's viewpoint as its not a company I follow nor would ever invest in.

"Let's be honest about this - the people who shriek about shorting attacks are people who are long of that particular stock, and are angry about losing money!"

Yes, let's be honest about this. I have no issue with people genuinely pointing out "real negative issues" honestly but engaging in alarmist language, smearing, and making claims the business will go bust and then engaging in a volte face within a month despite the fundamentals having not changed whatsoever gets my goat.

Personally I beleive making money out of other people's misery is not a way I'd feel comfortable earning a living. To engage in lies, and subterfuge as well to do it - morally reprehensible imo.

"shut down & punish people who've cost them money, by proving that their investments were not what they thought they were."

It's not genuine bona fide actions in many cases though is it, nor have their investments been proven to not be what they thought they were. All that has occurred is that reputational damage has occurred, often unfairly, to the detriment of a genuine business and the market valuation. You know as well as I that these days, ina global world, once the selling starts, if there's any doubt in a stock, it swiftly magnifies.

For the avoidance of doubt I am equally critical of the charlatans that engage in the opposite, rampign a stock on fatuous claims.

"A healthy market is essentially a free for all"

Is it really a healthy free for all market AIM side? I'd said say AIM is crooked myself and I tend to avoid it whenever possible.

"Although I think you'll find that the lies are overwhelmingly coming from the bull side (and often companies themselves, and their advisers) "

Don't disagree with those sentiments, hence my view of AIM in general. I share your scepticism of Chinese companies and wont touch them with a bargepole despite taking a look at China Shoto, Naibu, and co.

"As the old saying goes, if you can't stand the heat, then get out of the kitchen! Trying to shut down free speech on shares in the thin end of a very dangerous wedge, and all investors should resist it. It's a pity to see a ShareSoc article giving Roger's personal views, where he's still nursing a grudge over getting it so badly wrong on Blinkx."

I'm pretty comfortable in that regard, with investments in Nigeria, Vietnam, and other equally dodgy places round the world.

The point is "it's not about shutting down free speech" but shutting down blatant alarmist lies aimed solely at undermining confidence and sentiment...I'm more than happy to hear the negative side of the argument if its backed up with suitable evidence. To claim, for example, the capital raising will be rated junk, this means its rubbish when 90% of the sector are rated junk as well,but not making this clarification. is nothing more than immoral hyperbole. Which I have an issue with.

"It's a pity to see a ShareSoc article giving Roger's personal views, where he's still nursing a grudge over getting it so badly wrong on Blink"

Blinx is a company that relies on brand image. That image has suffered a massive reputational hit through the "slanted subjective report" our esteemed harvard professor scribbled WITHOUT initially disclosing that

1) He had been paid for it by known Shorting Hedge Funds.

2) Those Hedge funds were alreaady substantially SHORT prior to the report.

3) The Harvard professor had to repeatedly alter and edit his blog as he was being proved, time and again, to be talking rubbish -

The desired effect to Blinx's sales was subsequently acheived as a direct result of all this negative publicity, and the company is still trying to deal with this brand image destruction. The company itself, and the product, is still very viable. Sentiment though and trust , which is easy to destroy with a concerted negative campaign, hard to repair.

I suspect Roger will be proved correct ultimately.

Just my tuppence worth.

For the avoidance of dobut, I'm very "old school", "My word is my bond" etc etc.

I'm personally with Roger on this point.

Shorting,when used in conjunction with smear tactics, and outrageous claims in various tip sheets is unacceptable.

If you want to "hedge" a long positon with a synthetic short fine.

If it's a naked short then I disagree. And "Most" shorts seem to be accompanied with a flurry of smear tactics, news leaks, or outright lies in various so called tip sheets.

Recall last year 4 negative hysterical "SELL" notes on GKP, in the one week, citing underlying business factors, only to see 1 month or so later, the scribbler switch to a "BUY" note DESPITE all the underlying factors he highlighted as being reasons to SELL still remaining.

All that had changed was the share price!!!!

Having panicked all the weak holders to sell, and GKP is the largest RETAIL PUNTER stock, job done. And we all know how timid and easily swayed most retail punters are, even more so when they are trading on credit/margin.

Eg His shrieks of the debt raise is extortionate, its a junk rated company, its going bust.
The debt raise was perfectly acceptable,and both SNM, and a couple of other similar Oil explorers raising capital at the same time paid similar. As to the "It's junk rated " claim, said knowing full well that most retail punters would go hear Junk and be panicked into selling. However anyone with some knowledge would know that MOST Oil E&P companies are trated JUNK - even stockmarket darlings such sa Tullow!

So his language and tone was aimed solely at panicking, hardly anything but rampant distortion imo.

So whilst I have disagreed with RogerL in the past on BAe Systems, I think he is spot on with regard to shorting...

"It is clear that on the internet there is rampant distortion of the facts by some commentators, much of which is libellous but where there are no adequate legal remedies for those attacked."

Plenty of evidence of that claim exists. In fact I'd say such was indisputable - charlatans abound, not just working at the desks of City institutions that many despise these days, even when they happen to "work alongside" such financial houses!!!!

To say

"Shorters are the only effective market regulators now"

is, imv, childish. Whilst the regulators may not be as effective as one would like, they still perform a reasonably effective regulatory function for the main market,one that is far superior to the lies and scaremongering associated with most shorting attacks we see these days.

As for AIM its a casino and I tend to avoid it despite one "well known commentator" believing the likes of Quindell, Globo, Asos being the shite I love. Quite the contrary.

"you should be congratulating and thanking those of us who spot things that are badly wrong at certain cos, and shout it from the rooftops - savvy investors listened, sold out early, and saved themselves a lot of money. "

At least one of the three companies is perfectly sound. Blinx. But the negative campaign pushed by certain people, in conjunction it seems, with coordinated short selling by two well known US hedge funds and a supposedly objective Harvard professor(Whose reputation has since taken a rather bad knock) has shattered confidence in the product offering.

Many of these "cutting edge" companies are reliant on their brand image - any coordinated negative campaign, shattering that all important image, results in the company struggling to recover, even if its product does what it says on the box.

It's even worse when you find out that negative campaign has been commissioned by hedge funds ALREADY with their shorts in place beforehand. Is such behaviour moral - NO.

Roger,

You've got a blindspot on shorting attacks I'm afraid.
The 3 cos you mention collapsed in value because the market realised that the shorters were right! The cos in question have bad management, and bad business models, which shorts alerted investors to.

Shorters are the only effective market regulators now, it's a pity that ShareSoc (or you anyway) are on the wrong side of the fence on this issue. Instead of calling for more regulation, you should be congratulating and thanking those of us who spot things that are badly wrong at certain cos, and shout it from the rooftops - savvy investors listened, sold out early, and saved themselves a lot of money.

paul.