It’s not easy being a short-seller. The odds are stacked against you from the outset. Stocks tend to climb over time, so unlike peers who buy stocks before they sell, you don’t have the tailwind of a rising market. Then you have to navigate a tricky risk-management dynamic: When you’re right, your stocks go down but that diminishes position size and hence your potential return; when you’re wrong, your position grows, heightening your risk. As a short seller, the maximum you can make on a stock is 100%, yet potential losses are uncapped.
If that’s not enough, there’s a stigma to taking the other side in a world where most people cheer for rising prices. In his recently published memoir, John Mack, former chief executive officer of Morgan Stanley, is clear about who he sees as the villains of the global financial crisis: “These short sellers were destroying a storied franchise, built over almost three-quarters of a century of hard work and integrity.”
Source: With Its Adani Report, Hindenburg Is the Latest Short-Selling Villain – Bloomberg