What I don't understand is how people bet on a company's demise
I've never understood that line of reasoning - - - people think nothing of taking bets on a given sports team to win or lose - - - the racetracks give odds on horses and dogs to win or lose - - - - all of a sudden it's a bad thing when someone with the ability to look at a companies internals and decide they believe this "dog" is going to lose the race !!
"What I don't understand is how people bet on a company's demise..."
JC Penney has failed to execute successfully when it comes to selling things at a profit. With no evidence of any substantial change change in fundamentals, it's only natural that investors will short JCP for both fun and profit. JCP is on a certain collision course with bankruptcy. I can see the store-wide liquidation sales ramping up late next year after a horrific 2013 holiday selling season. Let's face it - JC Penney is a modern day Woolworth, a retail dinosaur facing its final death throes.