[rossdavidh]

Saying "this company is bad, we have a short in it" is not a new tactic, and is definitely not market manipulation according to the legal definition. Basically they are saying the market price is incorrect, and this is why they think so.

IANAL, but this is not a new tactic, and plenty of companies who are shorted would have challenged it if it were.

I mean, saying positive things about a company that you've bought shares in is essentially the same thing, and that happens all the time.