It does actually happen occasionally that a short seller will bet against the stock of a company and then do something to sabotage the company. There’s that guy who shorted the stock of Borussia Dortmund, the soccer team, and allegedly planted a bomb on the team’s bus. That’s sabotage! And then there are more metaphorical (and legal) forms of sabotage; Bill Ackman shorted Herbalife Nutrition Ltd. and then spent years pestering regulators to investigate it for being a pyramid scheme. That’s not a bomb, but it is definitely a committed effort to disrupt the company’s operations.
But the vast majority of the time, when a public-company chief executive officer complains that short sellers are sabotaging his company, he is talking nonsense. In general, the short sellers’ thesis is that the company is bad and that eventually the market will find out, not that it is good but they can ruin it. Of course, yes, sure, fine, short sellers have a theoretical economic incentive to publish the company’s trade secrets and blow up its factories and murder its workers. But they generally don’t, because we live in a society with laws, and those things are crimes. Muddy Waters Research once shorted a medical-device company because it claimed that it was possible to hack into the company’s pacemakers and murder their users. But it didn’t actually murder them!
