Counterfeiting Stock – Explaining illegal naked shorting and stock manipulation

>"At any given point in time more than 100 emerging companies are under attack as described above. [...] The success rate for short attacks is over ninety percent"

he/she can only find two examples (Global Link and TASER), which is a bit odd.

In any case, there is a connection to the current narrative of "short sellers are evil". But "the shorts" or "they" is one of these "us vs them" constructs that does not exist in any meaningful way.

Even worse, there is a common notion on r/WSB that "the shorts" are also "the suits" and there will be some rough awakening when folks find out that Wall St made more money on $GME than Main St, and that is on the long side, before any dip in share price!

By the way, this awakening might never happen and there is a scenario where we will never find out who traded what on $GME, because transparent transaction data is not publicly available. Thinking back about the 2010 flash crash [1] we still don't know with certainty what exactly happened.

Grant Williams did a podcast about the current events [2] and I can only recommend it (also check out his Endgame series).

There certainly are unethical sellers of stock (see e.g. Jim Cramer video where he talks about manipulation) but I have yet to see convincing evidence that unethical or fraudulent behaviour is more common on the short than long side.

There was a recent poll on Fintwit to name examples where "short attacks" hurt companies, and the paucity of meaningful examples further confirmed the above point (can't find reference due to crappy Twitter search).

[1] https://en.wikipedia.org/wiki/2010_flash_crash

[2] https://ttmygh.podbean.com/e/gwp_003/

If Bob has one of the five bananas but sells Alice a contract for delivery of 500 bananas and then can't make good on his promise, then Bob has screwed only himself, because now people know that Bob's bananas are only worth 0.002 of other people's bananas. Even if Bob finds another rare banana he won't be able to sell it for anywhere near it's true value.

Critically, Bob has only devalued his own banana contracts.

In the meantime, Alice has only the one banana she bought from Bob, and she spent all her savings on that banana, thinking she'd get 500 of them.

But Alice is clever. She has a plan for making back her savings. Alice sells 10 bananas for future delivery to Cecil. Alice plants the one banana she bought from Bob. And sure enough, come delivery time, Alice picks the bananas from her tree and delivers them to Cecil. Cecil, in turn, sold 20 fruit salads for future delivery to other people -- that's how she afforded the banana contract from Alice.

Two observations I want you to make:

1. The one bad actor screwed himself out of the market in no time at all.

2. The 22 good actors managed to allocate capital effectively where it would do the most good for everyone, and allowed entrepreneurs of very little means to start profitable businesses.

Derivatives trading is very resource efficient and has made modern society possible. It has a few drawbacks but they are self-correcting.

There are problems, but they are not with derivatives trading.

Edit: And keep in mind that Bob's banana contracts are not worth anything compared to other people's bananas, but they are still not completely worthless. If Dave owes Erica 50 of Bob's banana contracts, Dave will find it easy to repay them: you can trade almost anything for a Bob banana contract.