Wednesday, March 7, 2012

A look at short selling

WHAT IS IT: Short selling is when investors borrow shares and sell them in the hope that they will go down. Then they buy them back at the lower price and pocket the different. It's risky _ if the stock goes up, short sellers lose.

WHY OBJECT: Short selling is hardly new, but it's being blamed by companies and politicians for accelerating the demise of companies such as Lehman Brothers Holdings Inc. and Bear Stearns. Britain and the United States have temporarily barred short selling in financial companies' stocks in an attempt to stabilize markets.

BUT WAIT: Experts say it's companies underlying problems _ owning securities are sharply devalued or unsellable, for instance _ that drag their shares down, not short selling.

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