ericseb2003, your post got me thinking. I even took a quick look at XON. Nothing too in depth.
I want to make a few comments that may be helpful for some:
1) Not that this is the current case, but I have seen short attacks start Bear markets. As I remember, there was a pretty sharp sell off during the Enron episode. And, let's not forget the DOT.com implosion. In both these situations, investor confidence was shaken, and it took down the general market. Even the banking crisis of a few years back was initiated by shorting (of sorts) against mortgage derivatives. Not saying this is the current situation; but, lots of companies are facing major confidence crisis due to exposure by shorts, or even flat out bankruptcy (the ultimate short). Currently, thinking on Sunedison (bankruptcy), several major short candidates, and some oil patch players. There will be lots of pain, and some spill over.
2) Many short companies deserve to be outed. I remember a coworker asking me to take a look at Enron when it was flying high. About a year before it's freefall. Just from what I saw in the financials and online, I told him to stay far away. Many of the Dot.com failures had infinite PE ratios, no earnings, and no plan on how to become profitable. No surprise that bubble burst. Same happened and will happen with the marijuana industry. I peeked at XON Income Statements, and they are scary. A multibillion dollar market cap, with fast growing income, but negative earnings. Year, after year. Sounds a bit like Sunedison. Sounds a bit like many of the Dot.com implosions. At some point, a company has to produce, or it gets outed, or it goes bankrupt.
3) Shorting is one of the easiest ways to make money in the markets. Guaranteed, the 26+% decline in XON is just a down payment of things coming. Sunedison, from $32 to $0.32. Mitsubishi Motors, going to go down for some time.
4) There are ways to make money on the long side of short attacks too. There are oversold conditions, and dead cat bounces. I remember making some money when CTIX got burnt, by buying fear at the extremes. And let me make it perfectly clear, CTIX in no way deserved to be treated as it was.
5) There are often good companies targeted by shorts. I would argue most all good companies will be short targets if their valuations get too extreme. This is another thing to worry on in today's markets. There are several really good companies whose valuations are too good.
6) I am less the fan of Seeking Alpha since they started their Pro subscription service. It puts their users into have and have not camps. I'm sure that Pro subscribers will be way ahead of others in selling and shorting XON. The 8 days of short dribble coming is masterful. It is going to put extreme pressure on XON share price. And, for many days. As for SA, I do think they have major conflicts of interest going on.
7) CTIXers and all investors should think on protecting themselves from short attacks. Could happen to good companies, or any company. Chances are more likely when the company is a cyclical high. I like to keep some cash. I have gravitated away from individual stocks, and am playing the averages with ETF's. Also, hedging and shorting via ETF's. I have not shorted an individual stock in many years, as I trade via a 401K account.
I know my cash position helped me recover all my CTIX losses from the share decline after the SA hit piece. I bought at several key lows, and was able to capture 40%, 20% gains on several of the rebounds. I remember after EIX took a crash decades ago, I was able to recover everything within 3 months by buying at the low. I was an employee at the time, and had a pretty big stake. The company was unjustly targeted like CTIX, the market figured it out, and the share price recovered. Unlike CTIX, the EIX recovery was only a few months.
I actually have been involved in many companies who have suffered from short attacks over the decades. In all cases, I had done good due diligence, and more than recovered within a short span of time. Mostly, because I did have cash, and was diversified. I also was able to recover from the market crashes over the decades, by using the same strategy. I bought fear, and held tight.
Bottom line is that each company that is shorted is unique. The good ones, likely will bounce back. The bad ones, bankruptcy. An investor needs to know what they own. In the case of CTIX, I know this is the real deal. I will not be scared away by shorts.
What is really sad is when a small cap with limited resources is unfairly attacked on specious grounds. The diversion of resources is often overbearing. In some cases it could end what promise the company legitimately offered. Thankfully, CTIX is strong enough to weather the storm. And, it has emerged stronger than before. And as Bizzy recently put it (paraphrasing), "Leo has upped his game in the past year."
