Short sellers provide valuable research, says Samir Arora; disagrees with Ajay Bagga on Hindenburg

We need more people willing to write negative reports, short stocks etc for better price discovery, wrote Samir Arora

Short sellers provide valuable information and the public can decide whether to agree or act on it, wrote Samir Arora.

Helios Capital's founder Arora was debating the role of short-sellers on platform X with another veteran investor Ajay Bagga, following the winding down of Hindenburg Research. On January 15, the founder of Hindenburg Research, Nate Anderson made the announcement with a personal note explaining the reasons for doing so was not any specific thing, "no particular threat, no health issue, and no big personal issue".

Following this there have been various debates online about the reasons for the closing of the firm and whether the short-seller had provided any value to investors. Among these debates was the one between Arora and Bagga.

Bagga had written that the winding down may have been to escape a regulatory action and that short sellers do not operate from an altruistic, truth-seeking endeavor.

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He wrote that Hindenburg operated in a grey zone, published negative reports and taking short positions; that short sellers rarely make sustained profits and that's why the rare few who do are celebrated so much; that the damage from the targeted attacks of such entities have been done to companies, promoters and markets; and that such entities business models were essentially issuing "scathing reports on companies and promoters and simulataneously shorting them in advance of the release of these damaging reports".

He closed the post with: "(Hindenburg) Wont be missed. Dimissed".

In response to this, Arora wrote that Bagga is a friend but Bagga's take away is "very wrong".

Arora wrote, "Shorts provide valuable research and information and then readers/public may choose to agree/act or not or even take advantage of any fall, if they think price action is unjustified."

He added, "We need more people willing to write negative reports, short stocks etc for better price discovery."

In the comments section, there was also a humorous exchange. One person accused the short seller of being a fraud, of engaging in insider selling and of giving information to hedge funds before issuing the report and so forth.

To this, Arora replied tongue-in-cheek: "You obviously do not understand the meaning of many of these terms".