Short selling
Betting a price will fall, by selling shares you have borrowed.
You borrow shares, sell them, and hope to buy them back cheaper before returning them, pocketing the difference. If you are right, you profit from the decline.
The asymmetry is savage. A share you buy can only fall to zero, so your loss is capped at 100%. A share you short can rise without limit, so your loss is uncapped. You can lose more than you put in.
Worse, if the price rises far enough your broker will force you to close the position at the worst possible moment. When many shorts are forced to buy at once, the price spikes further, which is a short squeeze.
The loop that feeds itself
None of this is a judgement about the company. It is a margin clerk executing a rule, and it stops the moment the forced buying runs out.
It is how markets price in bad news, and short sellers have uncovered many of the great frauds.
Shorting something merely because it looks expensive. Expensive things routinely become far more expensive first.
Related terms
See Short selling on a real company
SteadyShares pulls this straight from the filings for 1,100+ companies, alongside moat scores, DCF fair value and peer comparison. Free to look around.
Open SteadyShares