The recent furore around activist short selling, particularly surrounding research firm Viceroy, has brought some interesting attention to both the role of research houses and the contextual implications of their work. Broadly, short sellers are investors who take investment positions on companies whose share price they believe will decline due to weak fundamentals or operating irregularities - often these investors glean these insights from internally generated research. Activist short sellers bring a more targeted approach to short selling - often involving bringing new information to the market that is deemed to be material to the value of the company. Such information would relate to management impropriety like fraud, misstating of earnings or earnings risks and outlook, among many other issues. Simply, they are like the classroom monitors who report on the misbehaviour of pupils the teacher might not see. If this is so, why are these activist short sellers received with so much...
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