What is the mechanism by which you think shortsellers cause companies to go bankrupt? Can you think of any examples of short sellers causing a bankruptcy?

They soak up investor money that would have otherwise gone towards sufficiently capitalizing the company (via equity raises).

Short selling has both supply and demand effects. So while it 'soaks up investor money' it also creates demand for incremental money through lower prices.The laws right now basically exist to constrain the supply that can be brought on quickly to prevent that getting of line. That's one of the main reasons to ban naked short selling - because it removes the friction to massive and infinite supply increase. It's also super risky because if you don't succeed you end up short a bunch of shares at artificially lower prices. So practically the scenario you are worried about is already addressed in securities regulation.

I would say that short sellers are even more important around primary transactions because then share price matters more. Good prices prevent new investors being left holding the bag and inefficient allocation of capital which could have gone to a different business with better investment opportunities.

> Do you think it is a good idea to help Intel go bankrupt because it's shitty right now in comparison to AMD?

Of course not. But if either one of them has secret bad information, it's good for everyone to have it revealed to the public so the stock price can be more accurate.

Fraud may be rare but companies have negative info all the time.

No company goes bankrupt because of a low stock price.