[n1231231231234]

maybe it's narrow minded, but for me, investing is all about giving a company mid- to longterm support so that they can expand their business. shorting is none of that. it doesn't create any value for society at large. if anything, it is, imv, close to professional gambling. but even gambling isn't this destructive. that's why i have zero empathy for those who lose money from shorting.

[hsienmaneja]

Purchasing common stock after an offering (I.e. on the open market) doesn’t do anything to support a company, either. It’s essentially just paper being traded back and forth.

[TheSoftwareGuy]

But having the ability to liquidize their stake at almost any time makes it easier for investors to put money into the company, and therefore gets more investors on board.

[ndonnellan]

Unless the company needs to sell more stock or gives options/grants to employees. In either case, a higher price reduces the fraction of the company needed to be sold to get the same amount of cash. An increase is share price is almost always still beneficial to the company.

[Areading314]

It creates a lot of value when short sellers discover that businesses are lying or cooking the books, see enron, worldcom, etc.

[robbiep]

Short sellers are acting on data and a worldview that is also how the long buyers are thinking of. short sellers are always going to completely tank. And there's a reasonable chance that things will.

Regardless, there is a pretty strong argument to make that shorting is actually healthy for the economy because it leads to creative destruction

[anjc]

It sounds like you're describing something more like loans, than a market. Short sellers increase market liquidity, and help with price discovery. There's no destruction. This is a good thing, especially for a mega-hyped but under-delivering stock like Tesla.

[confiscate]

one reason, that is not gambling, is insurance

e.g. for farmers, they can predict their harvest 5 months later, but can't know for sure.

They can short their own industry stocks. If the harvest goes good, they have crops to eat. If the harvest goes bad (e.g. forest fire), the short would net them some money.

http://www.theoptionsguide.com/short-hedge.aspx

[mpfundstein]

Futures are provably a better vehicle for that, aren’t they?

[confiscate]

if there is a forest fire and all crops were lost, how would futures help the farmer?

Futures let farmer lock-in a sell price for the crops, but without any crops due to the fire, the sell price wouldn't matter

[seanmcdirmid]

A lot of investing involves hedging and capital preservation, making bets and various counterbets (including shorts) to make sure you probably won’t lose st the end of the day. Some of those shorts maybe were not speculative but counter bets, and the shorter didn’t actually lose money overall (though I couldn’t tell you what they were countering).

[jampekka]

Buying stock on the market doesn't really support the company. After the initial sell of the stock it's just casino.

[hinkley]

How do you figure that?

If nobody buys the shares after the IPO then there is no demand and the market cap drops to zero. There’s no reward for the people who took the initial risk on the company and then what’s the point?

Ever heard of corporate raiding? A healthy stock price prevents hostile takeovers. It creates a class of emitionally invested citizens in the case of other external threats. It lets the public subsidize bonuses to employees (stock options) and in the case of a merger gives the company an asset that isn’t cash that can make up part of the compensation.

[ptsch]

Depending on the country and on the broker, investors who own the stock can profit substantially from lending out their holdings to short sellers. Unless of course you use one of those cheapest brokers or an index fund to “lower” your transaction costs - then the broker or the fund manager will lend out the stock which you own and pocket the entire profit.

So the response to the argument: investors support the company, short sellers support the investors.

[agumonkey]

I may use the typical argument that whoever is smart enough to profit on short will make "good use" of it.

[andrepd]

Day trading is 95% luck, so we might as well apply that argument to roulette.

[mpfundstein]

You’re not a professional day trader, aren’t you?

[andrepd]

No, I'm not. Why?

[marketgod]

It's skill but anything can go wrong.

[misja111]

Shorting a stock will lower its value (supply and demand) so that the supporters which you are talking about can more easily invest in their favourite companies.