Do valuation shorts work?
from CFA Institute's Enterprising Investor
Reasons to short a stock fall broadly into two “buckets:" Fraud and valuation. Fraud shorts are stocks where the (short) investor believes the company is misleading the public about its business. This can range from mild and small-scale, such as aggressive but GAAP-defensible accounting, all the way up to massive and brazen fraud, such as fictitious revenue and profits. Let’s Gowex is a recent and spectacular example of the latter.
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