I don't have an issue with short selling
It is as you say perfectly legal, and you are right in that short selling itself doesn't lower the price. The issue comes when an attempt is made through misinformation, disinformation or rumour mongering to adversely affect the price of the shares.
In this manner the seller is not shorting the stock because he believes it will fall. He is shorting it and taking actions to encourage it to fall.
Short selling is done when a trader has borrowed stock he does not have from a broker (paying the broker a fee for borrowing the shares), and then sells it at market price. He makes his profit by waiting for the price to drop then buying an equivalent number of shares to return to the broker.
The issue comes if the price does not drop. The seller has to repay the shares that he has borrowed and also raise enough money to cover any costs.
The real worry for them is that short selling of stock leaves you open for limitless loss. The shares that you have borrowed must be repayed. You borrowed them at 10 cents and sold them expecting the price to drop to 5 cents so you could buy and return them.
The share price does not drop however but goes to 15 cents, then to 20 cents then to 50 cents. You are now in a position where you have to pay five times what you borrowed (plus commissions) to cover the debt. There is no upper limit on the possible loss.
So what do you do if you are in that position. Hire a few two pot screamers to rant, rave and provide disinformation. It works even better when they write in bold and capitals.
And yes, this is illegal. But whether it's worth SMME's effort to complain or whether the SEC would follow it up is open to debate.
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