The stock market has been plagued by these speculative attacks, close to half the trades have been "phantom" sales by short sellers who did not actually own the stock.
Targeting a stock or other asset for take-down, either for quick profits or for corporate takeover. Today the target is J. C. Penny, but tomorrow it could be something else. When Lehman Brothers went bankrupt in September 2008, some analysts thought the investment firm's condition was no worse than its competitors. What brought it down was a massive bear raid on 9-11 of that year, when its stock price dropped by 41 percent.
The real shareholders get none of this profit. Worse, they can be seriously harmed by the practice. Their shares are being used to bet against their own interests.
JCP Short Interest at 1/15/2014 108,754,499
Sentiment: Strong Buy
The Securities Act of 1933 regulated short selling by imposing an "uptick" rule, which required a stock's price to be higher than its previous sale price before a short sale could be made; and by forbidding "naked" short selling -- selling stocks short without either owning or borrowing them. But the uptick rule was repealed in July 2007 - Nomen Omen, right before attack on our financial system in 2008.
Sentiment: Strong Buy
Mostly hedge funds. But why blame them? They are doing what Congress and the President allow. Options, excessive shorting and program trading causing the froth are problems only solved by firing politicians.
Meanwhile institutional longs smell blood in the water knowing the float is locked up. Out of the hundreds of firms long, they increase their position by a small percentage and shorty finds no shares available. Stay long.
I don't get your point that half of the short sales were executed by someone who does not actually own the stock. By definition a short sale is made by someone who does not own the stock. Your brokerage firm borrows the shares from someone who has a long position and then uses those borrowed shares to complete the delivery on the settlement date.
" When Lehman Brothers went bankrupt in September 2008, some analysts thought the investment firm's condition was no worse than its competitors."
Therein lies the difference, JCP is much worse off than it's competitors.
"some analysts thought the investment firm's condition was no worse than its competitors"
And some analysts think Penney is on the road to recovery. There are always analysts who are wrong and there are always longs who will pump a dying company until they finally go into bankruptcy.
I was short Lehman and it had nothing to do with evil bears. It had to do with Lehman's leverage ratios being wildly out of whack and them not being hedged.
In reality they use "Bot Trading" measured in Nano Seconds. They hit a stock with a million bids at a lower price to fool the Exchange's Computer into lowering the price, they then quickly remove the bid before it is executed., we humans are too slow to react, this is how they do it, some suggest this is 80% of the Markets activity.