[skybrian]

There are firms that look for good opportunities to short stocks. Find some credible bad news, short the stock, then publicize the bad news.

If the news is actually true, this might even be considered a public service (as well as obviously a way to make money).

They probably wouldn’t do until they actually got a tip. Also, they might short crypto-related stocks if that’s easier.

[llimos]

This is how markets weed out the bad ones on their own, without relying on government.

[SantalBlush]

Not really. Markets weed out unprofitable firms. Government doesn't really care about that. On the other side, government regulates firms that engage in some harmful (open to interpretation) practice, and markets don't care about that unless it makes them unprofitable.

[ygjb]

I am curious about how that type of activity doesn't constitute insider trading? Presumably having "bad news" would constitute material nonpublic information?

[jfrunyon]

Because it's not nonpublic information. It's public information that no one else had put together the pieces on, yet.

(Contrary to some of the other commenters, you don't have to be an insider yourself to run afoul of the law. If the information is not public and you got someone to leak it to you, for example. https://www.investor.gov/introduction-investing/investing-ba...)

[Breza]

Exactly. Did an oil company exec tell you that their sales are down before the earnings are released? That's insider trading. Did you hire a helicopter with a thermal camera to see how full their storage tanks are? That's perfectly legal.

[speedybird]

It might be insider trading in some countries, but it isn't in America. It's perfectly legal to trade on information you found out through your own research and didn't tell anybody about.

[qeternity]

Simply trading on MNPI is not insider trading. You must have a fiduciary duty to protect said MNPI.

If I do some analysis and reveal some MNPI for myself, it's perfectly legal to trade on that since I do not have a fiduciary duty to any publicly traded firms.

[snark42]

They do the equivalent of investigative journalism. Arguably everything they know is public, just no one has looked or put all the pieces together until they do a press release.

[djbebs]

Because they are not insiders