Frank Rotman

The Invisible Battleground Managing a public company isn’t easy. The challenges aren’t just financial or strategic. There are so many interested parties that constantly put pressure on the CEO to deliver against promises. And when things aren’t going well many of these parties express their opinions publicly and not just in a factual way. Sometimes the comments are emotionally charged and just plain mean spirited.

Imagine leading a team and pouring your heart and soul into a business that’s facing technological disruptions that threaten to render your entire company obsolete. A lot of businesses are staring into this abyss given how quickly technology is evolving! Now add another layer of psychological pressure: Short sellers who are actively betting on your failure.

This is the brutal reality for many business leaders. The stock market enables investors to express their opinions with their wallets, but social media enables them to amplify their opinions in a very public way. And short sellers play a particularly controversial role in this landscape. To many retail investors, short sellers represent something viscerally wrong. Not “illegal wrong”, but somehow just “wrong”. It's a gut-level reaction rooted in a shared human instinct: We naturally root for the underdog, we respect the struggle, and we inherently dislike those who profit from another's potential downfall.

Yet, the market is more nuanced than simple moral binaries. Short selling serves a critical function in maintaining market integrity. Like investigative journalists or internal auditors, short sellers can expose overvaluation, potential fraud, or unsustainable business models. They are, in a sense, a form of market self-regulation. Jim Chanos's pointed observation that the SEC often arrives only after the damage is done underscores the importance of these financial watchdogs.

However, empathy remains crucial. Behind every stock ticker are real people. Leaders, workers and families with hopes and dreams. Not every struggling company deserves to fail. Some are genuinely fighting against overwhelming technological and market forces, displaying remarkable resilience and innovation. Short sellers might see numbers and trends, but they don't always see the human determination behind those figures.

In this high-stakes environment, perspective is everything. Short sellers are neither heroes nor villains. They’re merely participants in a complex ecosystem.

With this perspective in mind, the earnings were just released for one of the most polarizing stocks in the entire market – GameStop. I’m not going to tear apart their earnings or give my analytic take on whether they’re on track or off track for a true transformation. What I will say is that GameStop is a perfect example of how devastating it can be when technological trends upend your business model. A brick-and-mortar model can be a liability when streaming becomes the norm and pivoting from one model to the other isn’t easy.

The short sellers took the position that GameStop was poised to fail and wasn’t going to make it. The retail investors didn’t like the "big bad professional investor" rooting against GameStop and went long. And through the sheer conviction of the masses the game that was played allowed GameStop to raise a lot of money and attract a new set of active investors who believed that a transformation was possible.

Will they succeed? Maybe and maybe not. The core business is still shrinking (revenue is down a lot) but the operating losses have been stemmed and they have a lot of cash to work with. What’s funny is that the part of their business that’s printing money is their investment income which was only made possible by raising cash which was only made possible by retail investors driving the stock to stratospheric levels. What a meta series of events to unpack! If it hadn’t been for the game being played between retail investors and professional short sellers, GameStop wouldn’t have been given a second chance.