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Comment by danparsonson | Hacker News Reader

The explanation I heard was not that the shorting itself causes the company to tank, but that hedge funds are incentivised to do whatever they can to cause companies to tank once they hold large short positions - via disinformation campaigns, for example. I seem to remember Toys'R'Us suffered a somewhat similar fate not so long ago?

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Amazon, Walmart and Target were the ones most responsible for Toys R Us going out of business.

They actively ran ads to attract customers away from Toys R Us.

It depends, the PE firms that bought Toys R Us did what is considered a hostile move in an leveraged buyout (LBO) which is to saddle Toys R Us with lots of debt (aka they raised debt financing to buy the company) so it had to do everything it could to pay the debt and also generate profits for the PE firms and probably not enough to focus on anything else innovation or operation-wise. Its been noted that LBOs have lead to the demise of several famous companies as noted by Investopedia and LBOs has since gained notoriety.

See: https://www.barrons.com/articles/private-equity-firms-provid...

https://www.latimes.com/business/la-fi-toys-r-us-leveraged-b...

https://www.theatlantic.com/magazine/archive/2018/07/toys-r-...

https://www.investopedia.com/terms/l/leveragedbuyout.asp#:~:....

While true that has nothing to do with shorts.

It wasn't intended as an example of short selling because my point was that the GME saga isn't about short selling per se, but about sticking one in the eye of organisations that tank businesses just to make a profit.

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