Sharesleuth is a genius idea from Mark Cuban (he talks about it in detail here).
Basically, Cuban has employed a couple of biz journalists to investigate, in depth, some spurious company. Cuban then decides whether to short the stock, and then publishes the whole story on Sharesleuth, all the while pointing out his short position.
He does maintain his short position after the publication of the article, which does raise some interesting issues…although he’s making it clear what he’s doing, it’s basically a really smart business idea, and potentially one that self-perpetuates the hoped for stock decline on publishing the investigation.
But, Cuban’s long been a proponent of the benefits of shorting, arguing that Short seller provide an important check/balance on a market:
“Short sellers also provide a 2nd set of eyes looking from a completely different perspective. When a short seller called, I would always talk to them. It’s possible they know something you don’t. Maybe there is a problem with your product or service that they have heard from one of your customers that hasn’t filtered to you. The short sellers give you a heads up about that problem and the chance to go fix it.”
I’m fascinated by short selling, and Mark Cuban’s excellent insights – it’s like a really decent economics lesson…
There’s a bunch of interesting ethical questions in there, offset by the rigourous reporting (I mean, the company he shorts sounds well dodgy), but if this approach was taken by a less than rigourous, or trustworthy outfit – but then, the credibility of Cuban and his approach is what engenders the trust in the information.
UPDATE: watch me learn in real-time :-) – I didn’t know Warren Buffett was a famous shorter (more on Wikipedia here), and also advocates shorting as a market ‘policing’ role…