Yep, I'll have to admit you are right about how frothy things were. Still, why short a profitable company so heavily? I mean, most of the other 3DP entries weren't making profits and had debt loads. It's debt that threatens to undo a company severely if they can't keep raising cash and getting new loans and/or refinancing. This portends toxic debt just to keep the company afloat for another day, raises prospects of dilution, which almost insures that the share price will fall.
I'll also admit that with 3DS rising from 6 to over 30 and with Motley Fool hawking the stock, the ensuing p/e ratio had to look very good to a shorter, looking to make a quick buck. But look what actually happened. They took a rather heavy position and then the stock continued to run up, they didn't close their positions, they just kept covering the margin calls. When the stock hit the 90's you'd have expected them to come on heavy, but they instead waited until the stock had fallen over 20%, then they started shorting heavier and heavier all the way down. A move that averages down their position and makes their potential profits smaller and smaller. In short, they seemed to be working against themselves, putting more and more money at ever increasing risk, and ensuring that they themselves would not reap much of a reward in the end.
Thus it only makes sense that they were engaging in manipulative short selling, because it's either that or some candidates for the looney bin have somehow gained control of some very large blocks of cash. Remember shorting is a risky affair even when the target is headed for bk. Read some of the short seller boards (if you can find such) and see how they weep and gnash their teeth when "sure to fail stocks" rise and soar on bad news. Of course, in the penny market the MM's take full advantage of shorters, walking prices up and down to wipe out both longs and shorts alike.
So it's the way they've managed their risks that leads me to believe that they either know something no one else knows, or they're stuck in a position they can't seem to break free from. Just because a stocks price is low, doesn't automatically mean there are plenty of shares on the trading room floor just waiting for the shorters to scoop them up.
