Profiting from bad news.
Wired is running an interesting story about Mark Cuban financing ShareSlueth.com by shorting stocks that they are about to expose with investigative journalism.
The gut reaction is that this is unethical. But after thinking about it, I am not sure that it is. Cuban is paying for the research. He is shorting the stock that he believes is overvalued. He is sharing truth that he discovers with the public. If a stock is overvalued because of fraud or deceit, the public does deserve to know.
Of course if they make a mistake and badmouth an undeserving company, there could be a lot of very nasty consequences. I would guess that this is not too much of an issue, because there is no shortage of deserving companies to badmouth.
