A few points about short selling. Selling short a stock is the act of selling a stock that you do not own to profit from an expected future drop in stock price.

How can you sell a stock that you do not own you may ask? Well, you need to borrow that stock from someone. Usually, if you are a private individual you will be able to easily borrow most stocks from your broker. For example, E-trade allows its customers to borrow stocks to sell them short with relatively few constraints. If you are a large trader you will be able to borrow stocks from large institutional investors who charge a very small fee to borrow some of the stocks that are in the very large portfolios they manage on behalf of their fund holders.

How does it work from there? Let us say XYZ stock is trading at $25 and you believe it should not trade for more than $20. In this case, because you expect the stock price will drop, you borrow 100 shares of XYZ and sell them all for $25. You get $25x100=$2,500 from the trade. If you were right that the price will drop to $20, you will later be able to buy the 100 shares for $20 each for a total of $2,000. You can now return the 100 shares to the lender. The difference in value between the two transactions, i.e. the $500 difference ($2,500-$2,000), represents the profits you made from selling short the 100 shares of XYZ. Of course, if you were wrong you may have to purchase the 100 shares for more than $2,500. In this case, you will make a loss.

Topic. I would like you to debate about whether short selling is good for the stock markets and firms in general. Some CEOs are very vocal about the negative influence short sellers have on their stock prices. Are short sellers evil as Elon Musk has often declared? Do they fulfill an important role in uncovering bad policies or fraud?

please provide at least 1-2 paragraphs, outside research is accepted but please cite sources.

Thank you!