How Short Sellers Become Targets During Market Routs

When stock prices plummet in a market rout, short sellers often become a target. Regulators can attempt to curtail the plunge by restricting equity short selling, or betting with borrowed shares. Shorts, as these bettors are known, say their trading helps keep markets functioning smoothly. Critics say their actions can blur into market manipulation. During periods of acute market distress, such as early in the coronavirus pandemic, some of the hardest-hit countries again imposed temporary bans -- although to what effect is unclear.

Short sellers borrow shares and sell them, hoping to buy them back at a lower price to profit from the difference. But getting the timing right is crucial. If the stock price rises, they could lose money instead.