Naked short selling, or naked shorting, is a controversial form of selling shares of securities short. Some forms of naked short-selling are legal and some are not. Controversy has surrounded naked short-selling aimed at profiting from share price declines. The Practice...Short selling is the practice of borrowing stock, then selling it in hopes that the price will go down and it can be bought back at a lower price, generating profit and allowing one to return like shares for the borrowed ones.
"Naked shorting" refers to "shorting" a stock for sale without first borrowing it. The risk that one may not be able to then acquire the shares needed to deliver on the sale is a contributing factor to the controversy surrounding this practice.
Critics contend that the naked shorting is fraud, and that it constitutes "taking a buyer's money and not delivering the product."
Author and journalist Gary Weiss praised the anti-shorting campaign in his book Wall Street Versus America, as a blessing with the mechanisms by which the bubbles created by pump-and-dump artists might otherwise go unchecked.
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