Short Sellers Lament

Normally public company’s complain about short sellers trying to take their stocks down, spread rumors, and doing naked shorting (where the shares are never borrowed at all). Operations like Overstock seem to complain about short selling almost once a day.

Now, short selling firms are whining in open court. Two short selling firms have sued 13 investment banks like Morgan Stanley and  Goldman Sachs for fixing prices on the fees for the borrowed shares. In particular, the complaint says that the short sellers were overcharged for “hard to borrow” shares. That would be an antitrust claim.

But, what if the shares are hard to borrow. Not all companies have huge floats or trade 10 million shares a day. Should the fees be fixed without any elasticity when the degree of difficulty may vary from stock to stock?

An odd claim from firms that bet that stock prices will drop. But, with the markets up, they may not have anything else to do.

Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.

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