Don't conflate shorts with the abusive hedge funds and slimy authors like Mako and legal-abusers like Rosen.
Short sellers can provide a check against bubbles in assets and help protect investors against overly ambitious claims by companies. The SEC's ability to remedy things after investors have lost everything is extremely limited. Sometimes checking bubbles before they devour the innocent is the best measure against them. Short sellers deserve to make money when they take risk to achieve this goal.
The company doesn't even need to be a fraud to need correction. Sometimes they are just too ambitious and get overvalued which poses risks to potential unwary investors. Take CTIX/IPIX as an example in hindsight.
CTIX was skyrocketing and hit a price of $4.93 following the Brilacidin Phase 2B trial for ABSSSI at the close of 2014. Investors were stoked. There was talk referencing multi-billion dollar buyouts of Cubicin, 2015 being the year of the partnership, phase 3 being a shoe-in based on the results, Kevetrin making a spleen lesion disappear, the pursuit of Prurisol, uplisting to NASDAQ, etc. It was around this time that I started buying CTIX/IPIX in the $3.50 area.
The shorts also started to pile in at this time. They predicted things we hungry longs were not able to:
Have we started a phase 3 for B-ABSSSI? No.
Have we struck a lucrative partnership for B-ABSSSI?. No.
Has Kevetrin done anything like that Spleen lesion PR since? Not that we're aware of.
Did we uplist? No.
Is the anti-biotic market as lucrative as the Cubicin deal would lead us to believe? No.
Was Prusisol the real deal? No.
Anyone who predicted these things recognized that it was too soon for CTIX to reach a $500M market cap and beyond. The shorts acted as a brake on a superheated market cap. How high would we have chased it without shorts before the above points became evident and it crashed back to pennies? $7? $10? $15? $30? Who knows? I know I was frantic to come up with more cash before the train left the station. It was bad enough having shares that went from $3.50 down to $0.07. I know I would have chased it much higher before CTIX's wings melted from its back.
The shorts often have better research and a better understanding of the market in these cases. They take great risk with exposure to limitless losses to short so you can usually be certain they know what they are doing. They got it right for years with CTIX/IPIX and we dwindled to pennies with very little monetization of our apparently excellent clinical trial results. COVID struck and unexpectedly reignited our fire but I doubt we would have recovered without it.
Now we longs are chock full of shares waiting for our COVID trial to begin and ramp rapidly next week. Will the shorts bet against us again? For the sake of mankind and my wallet I hope not. Only time will tell.
I don't blame the shorts for our plight up til now though. Our company got a lot of things wrong and I got in way too early without a proper understanding of the market of the pipeline at the time.
Go IPIX!
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