Are the Short Sellers Right About Aterian?

On May 4, an anonymous short seller, "Culper Research," launched an attack on Aterian (NASDAQ: ATER), a company that uses artificial intelligence to find, acquire, and launch popular consumer goods businesses. Is this a bad sign for your stock?

Yes and no. Yes, in the short term, a short attack on a small cap will often send shares down, and Aterian's stock has dropped 35% since the report came out. Sometimes when there is "blood in the water" other shorts will jump in as well. On the other hand, shorts are always future buyers of your stock. If too many people are short a stock, the trade might flip on them, and a short squeeze might take place, causing the stock to zoom higher. That's what happened to the shorts in the Gamestop frenzy earlier this year.

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