Activist Short Selling

Activist short selling is an extension of short selling of securities. It is short selling, with a “nudge”, whereby the objective of the nudge is to have the price of the company that is shorted to fall and to fall sooner than it otherwise might.

But why nudge? Generally, activist short sellers lack the financial resources to drive the price of the overvalued security to fair value. Furthermore, the difficulties often experienced in borrowing sufficient securities to affect a price change by other short sellers restricts the ability of additional participants “joining the party” and also shorting the security .

The activist short selling model has evolved. No longer is it purely just a single firm that researches the market to find an overpriced stock to then write a short report about before short selling the stock and publishing the short report. Today, there are specialist participants at each step of the process.