Here Are 5 Times Activist Short Sellers Brought Down a Company; And 5 Times They Failed

Last week’s attack on IperionX (ASX:IPX) by Activist Short Sellers was not the first time this has happened, but we would argue no company that had undergone such a meteoric rise (i.e. bought a project from nothing to something) had copped such an impact.

The practice of Short selling involves borrowing shares of a security from a broker, selling those shares with the expectation that the price will fall, and then buying back the same number of shares when the price has declined in order to return them to the lender.

And short selling activists hope to profit off the back of reports they issue. Do you think it is a dirty practice? Would you go so as far to agree with Gerry Harvey who has publicly stated he thinks they should be incarcerated? We certainly think the practice is dodgy, and don’t think the fact short sellers disclose they will profit makes it any more acceptable than if they hid it. But good luck stopping it because so many short sellers cannot be regulated as foreign entities.

Research from the University of Sydney found all ASX companies which were victims between January 2015 and August 2020 lost a cumulative economic value of $15.7bn within a month – $4.1bn of which came on the same day.

Sometimes, companies make a complete recovery, but at other times it is the beginning of their end. In this article, we recap 5 times a short seller report bought down a company, and 5 times when short sellers ultimately were vanquished (i.e. the company recovered all of its value even if it temporarily lost value).

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5 Times Activist Short Sellers Bought Down a Company

BlueSky

In March 2018, a U.S-based short-seller, Glaucus Research, published a report alleging Blue Sky had vastly overstated its assets under management (AUM), misvalued its underlying investments (especially wine retailer Vinomofo and Shoes of Prey) and in some characterisations labelled the business “Ponzi-like”.

Blue Sky rejected the report. The founder and ex‐managing director, Mark Sowerby, later launched a lawsuit claiming the attack was a “conspiracy” (a “short and distort” campaign) involving the short‐seller, brokers and insider trading. But the very next year, the company went into administration. Eventually, (actually only a month later), it cut the value of some assets and decided to disclose in further detail how it disclosed FUM. The damage was done.

Valeant Pharmaceuticals

Valeant Pharmaceuticals International (NYSE/TSX: VRX) was once one of the fastest-growing and most controversial pharma companies in the world (2010–2015). Its strategy relied heavily on aggressive acquisitions, steep drug-price increases, extremely low R&D spending, and complex specialty-pharmacy arrangements

This business model drew intense scrutiny, but it was shrugged off. Until an October 2015 report from Citron Research which accused it of Enron-like accounting practices. The report alleged that Valeant was using specialty pharmacies (notably Philidor) to inflate revenue, recycle prescriptions, and obscure channel stuffing.

This would ultimately become one of the largest market-cap destructions in modern corporate history: over $80 billion was wiped out. Philidor was shut down and the company replaced its CEO, sold major assets and even changed its name to Bausch Health Companies.

Corporate Travel Management

This took a while for the company to fall, but eventually it did. VGI Partners alleged among other things, that the company’s revenue recognition policy was inflating earnings. As of November 2025, CTD has been in suspension for over 2 months for not lodging its annual report all because of uncertainty over revenue recognition. The situation is so messy that the company had to bring in a third auditor in as many years to determine which of the other two was right.

Luckin Coffee

This company is a Chinese coffee company, and while it is not dead, it is a shadow of its former self. In January 2020, short‐seller Muddy Waters Research published an 89-page report alleging extensive fabrication of sales, inflated per-store revenue, overstated “other products” revenue and exaggerated advertising costs.

Initially, it was denied…but by April, the company disclosed that its COO fabricated roughly RMB2.2bn (~US$310 m) of sales for 2019. The company delisted from the Nasdaq and relisted in China. This is a textbook example of a short‐seller report that turned out to highlight real, material fraud — the company collapsed; the listing failed; investor value was destroyed.

Nikola Corporation

Hindenburg, one of the more famous short sellers accused Nikola and its founder (Trevor Milton) of many things including passing off incomplete prootypes as functioning hydrogen electric trucks, creating a ‘fake’ promotional video (i.e. a working truck was rolling downhill), overstating pre-orders and partnerships and making false claims about its technology.

The company quickly admitted the truck video was a mistake. But Trevor Milton resigned as Executive Chairman shortly after. He’d ultimately be convicted of fraud and the company would ultimately pay significant penalties and settlements. The stock collapsed from a peak near $90 to under $5 within months and has stayed depressed. The company still exists but is small, struggling, and not close to the hype that drove its valuation.

5 Times Activist Short Sellers Failed To Bring Down a Company

Before we go with our 5, we’d make a mention of WiseTech. Ultimately, it is more than double what it was capitalised at in 2019, but the doubts J Capital raised about its M&A have come crawling back after the company’s biggest ever deal. With that out of the way…

Rural Funds (ASX:RFF)

In August 2019, Bonitas Research released a report alleging that Rural Funds Group, one of the few listed agricultural REITS in Australia was “worthless” and had fabricated rental income of ~A$28 million via its major lessee. The directors immediately fought the claims, including by buying on market, and they sued Bonitas the next month. In February 2020, the New South Wales Supreme Court ruled that Bonitas had made false or misleading representations under the Corporations Act and ordered damages.

Genius Group (NYSE:GNS)

Now, this company was not targeted by one particular short seller. But in January 2023, Genius Group alleged it was subject to an illegal short-selling scheme, including naked short selling and manipulation of its shares. And ironically, short interest rose significantly.

Genius Group appointed a former FBI deputy director to lead an “Illegal Trading Task Force” to investigate alleged naked shorting. The company announced legal actions and distribution plans for potential legal-win proceeds. The company remains listed and continues operations.

Roblox (NYSE:RBLX)

In October 2024, short-seller Hindenburg Research disclosed a short position in Roblox alleging inflated user metrics (daily active users, engagement hours), inflated valuation relative to peers, and safety/child-protection concerns. Specifically, it claimed that DAUs may include alternate accounts/bots, and engagement may be overstated. With a 92% share price gain in 12 months, there’s no question of who won this debate.

Adani

In January 2023, Hindenburg Research published a report accusing the Adani Group of a brazen stock-manipulation and accounting-fraud scheme over decades, involving offshore shell companies, undisclosed related-party transactions, and inflated valuations (~US$200bn). The short seller’s report triggered massive share-price declines across multiple Adani-group companies.

There was an enormous loss of value (i.e. tens of billions of dollars). However, the victory could not have been more clear cut. India’s regulator, the Securities and Exchange Board of India (SEBI) dismissed the allegations of fraud and related-party transaction violations in September 2025, giving the group a “clean-chit”.

Herbalife Nutrition

This is one of the most famous battles in short-selling history — a long, public war between short and long funds (something you don’t often see, at least publicly). Bill Ackman and his firm claimed Herbalife was a pyramid scheme, deceiving low-income distributors, generating revenue from recruiting and not product sales, and targeting vulnerable communities. Ackman pledged to ‘short Herbalife to Zero’.

Of course, the company denied it, but also investors including George Soros and Carl Icahn took long positions. The FTC investigated for years and Herbalife ultimately settled for $200m. So, the company did not get off unscathed. But, Ackman capitulated in the sense that he closed his short 6 years after opening it, and he lost hundreds of millions of dollars. The company remains publicly listed.