short sellers

Short sellers have been scolded for stirring alarm about the lender. Did they do more harm than those who preached calm?

In a market where so many have a vested interest in pumping up stock prices, short sellers serve as a necessary, if unwelcome, reality check

Considered strictly as entertainment, however, an analyst’s report into the company’s activities is remarkable

I was wondering how long it would take for the accusations to fly that Potash Corp. is a victim of short sellers. Not long, apparently. On Thursday a Merrill Lynch analyst downgraded the stock from a buy to underperform (that’s wishy-washy for sell, by the way) because of fears of a slowdown. When the fertilizer maker’s shares lost 35 per cent of their value—wiping billions from its market cap and helping to drive down the TSX by a whopping 800 points—money managers and investors quickly pointed the finger at those scourges of the investment world. In one Globe story a money manager said short selling was the only possible explanation for the rout. “Is there any reason to take $30 off Potash Corp.?” he asked. “I don’t think so.”

I can’t believe regulators in Canada are even considering following suit with the U.K. and the U.S. and banning short sellers, but they are, according to the Globe and Mail. It’s “under discussion” says Paul Bourque, senior vice-president of enforcement, policy and registration of the Investment Industry Regulatory Organization of Canada. That would be the self regulatory body made up of many of the financial firms who’s stock prices would benefit from a ban on shorts.