> That is pretty much what Hindenburg does; they find frauds and short them.
While such firms certainly have an incentive to make the company they've shorted look bad, it turns out that it works best (and is easier) when the company they short actually is bad. Thus, they've found a way to make a business out of identifying frothy financial bubbles built on shaky-to-fraudulent fundamentals and popping them.
It's kind of a public service in the sense that it corrects the market when it goes awry and ultimately they are betting their own money that their investigation is correct.
Unless you're wallstreet trying to punish some poorly run companies and leadership by shorting them, and then having a reddit lynch mob coming after you.
Hindenburg don't seem to waste much time on merely "poorly run". They seem to go for frauds: stuff that whether you think it will go down right now or not, you can't deny that it should.
But yes, that is exactly what Hindenburg does – not sure if GC thinks shorting companies you think are frauds is a bad thing or what – as far as I'm concerned it is the best reason for shorts to exist! I'd have more questions if Hindenburg wasn't shorting Adani Group after this report.
Funnily thanks to the Hindenburg disaster the airship is much more popular worldwide (outside of Germany and maybe the immediate vicinity) than the person it was named after. Which is kind of unfortunate because Paul von Hindenburg is a fascinating figure with an enormous impact on world history.
Not only was he a highly successful field marshal on the Eastern Front in WWI (after being brought out of retirement to replace the panicking previous commander there), he later became de facto dictator of Germany for the remainder of the war (until it was time to surrender, then he threw the dumpster fire over the wall to the civilian politicians). (Of course as his second, Ludendorff, wouldn't miss to tell anyone after the war, Hindenburg's role was more one of moral authority, calming presence and coordination, the actual war plans being made by the people under him, most notably Ludendorff who was really pissed after the war Hindenburg took all the credit).
However he's even more interesting after WW1, when his popularity brings him to being elected as President, being in de facto control of Germany again thanks to a constitutional workaround, and then working to stop Hitler from getting to power before finally being convinced to give him the chancellorship. After his death, Hitler also took over the presidentship, and that was that. So Hindenburg was the only man who could stop/delay Hitler from taking power, and he failed.
There are a few of these outlets that do research into companies with questionable accounting/fundamentals and then monetize the research via shorting+publicizing.
Haven't seen many "manufactured fraud" allegations. In my experience the research is often quite in-depth and they tend to be proven correct in the end.
Given that we're reading this, it's probably priced in by now. But in principle the answer would be yes, but only with money you can afford to lose; any investment on a single-name stock is risky, and shorting is even more so.
In my experience narratives are as priced in as they are accepted, so in the interim between "you first hear of this" and "everyone believes this" there is opportunity - bearing in mind that the interim between those two things is shorter the more believable the new thing.
But for instance in the case of "there's a new plague and China is locking down" there were several months between first hearing about it and everyone recognizing it.
Naked short sure, but you could buy some out of the money calls to cap your max loss. It’d just eat into the profit margin of your total bet. If you’re going to keep shorting more on the way down it gets more complicated.
If the report is true, there maybe insufficient market capacity for the stock to move freely, any short position - including the one that Hindenburg made maybe blown up by determined opposition.
