The conviction of famed short seller Andrew Left in June, days before SpaceX's IPO drew Elon Musk into a public fight with the industry, has reopened an old argument about whether short sellers keep the market honest or seek to profit from the destruction they inflict. With Mr. Left’s sentencing due later this August, it is important to reexamine the role these companies play in the marketplace.
A federal jury convicted Mr. Left of securities fraud. He was accused of using his reputation and media position to manipulate shares in a way that rewarded his trades. Short selling has long held an important role in keeping companies honest. But when these funds have developed a media wing to release stories to support their short positions, at what point does that become market manipulation?
During my time in Congress, and as a member of the Energy and Commerce Committee, my colleagues and I fought to target bad actors in the marketplace and support the values of a fair and open system. Companies that purposefully gouged consumers through raising drug prices were investigated because they were actively harming the American people. But who is regulating companies whose entire business model is based on targeting good actors to make a quick profit? Are activist short sellers a necessary evil to keep the market honest, or are they tanking prosperous companies in exchange for a quick buck?
Supporters of these companies love to point to Enron and Wirecard to cover up for their questionable model. And they are correct to. Short sellers correctly identified rot within these companies and raised the red flag. But activist short sellers have changed this model. Creating the noise has become profitable, whether it is based on actual analytics or not.
Activist short sellers publish critical reports in an attempt to drive down a stock while parading as investigative journalists. Consider Hunterbrook, a hedge fund that simultaneously runs a newsroom. The premise is: reporters investigate a company, the fund takes a position, the story publishes, the market moves, everyone gets paid. The firm has published more than thirty short campaigns since 2024, each one arriving with the confidence of a grand jury indictment.
But these firms are not run by the Wall Street sleuths who discovered the hidden flaws in the housing market; they are Harvard graduates, cosplaying as Michael Burry. Hunterbrook’s founders have never worked in a full-time newsroom. Their reports – aiming to move markets to support their short position – do not always carry an adequate or accurate factual basis.
The results are far from convincing. Hunterbrook shorted TeraWulf in August 2024, solely based on marketing materials. The stock has since tripled. It shorted Symbotic in September 2024; the shares have more than doubled. It shorted NuScale Power, which rose 379 percent over the following year, and Snowline Gold, which nearly tripled. In January 2026, it bet against Ubiquiti at $549 a share and watched the stock climb past $1,000 within three months. In July, it shorted StepStone Group, which promptly gained more than 20 percent. The Wall Street Journal reported that the fund lost money in the first quarter of 2025 on bets including Hims & Hers, and has since pivoted toward taking long positions and holding them longer. They only became profitable once they flipped from their short position, which they were built on.
The failures share a common theme: a single fact, inflated into a sweeping conclusion.
The case against Hims & Hers was based on a pair of Reddit posts from users describing bad reactions to weight-loss drugs. Both users had accidentally doubled their own dosage. Hunterbrook's report omitted that detail for one of them. The case against CAVA rested on health-department grades at locations in New York City, the city where the firm's founders live, while ignoring the other twenty-five states in which the chain operates. A bullish call on high-purity quartz miners was built on the premise that Hurricane Helene had knocked out North Carolina mines with no timeline for restart; the mines restarted six days later.
This model should bother people. They are not playing with fake money. Shorting is a completely legitimate act in the market, but there must be consequences when firms target companies based solely on circumstantial evidence and their own short position. These theses have a lasting impact on American and these companies with almost no consequences for those releasing them. Shareholders panic and can’t reverse their sale when the story’s evidence falls apart. Employees read that their employer is a fraud, while lenders reprice.
Nobody should want a market without skeptics. Betting against a company is a legitimate act, and the good short sellers have earned their reputations by being right about things everyone else refused to see. But these reports need to be based on a well-thought-out argument, rather than social media fodder being packaged as fact, all to cover a hedge fund’s position.
Ryan Costello served as the U.S. Representative for Pennsylvania’s 6th district from 2015 through 2019 as a Republican. During his time in Congress, he sat on the House Energy and Commerce Committee.
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