Short selling is an investment strategy where an investor borrows shares they don't own, sells them at the current market price, and hopes to buy them back later at a lower price — pocketing the difference as profit. If the price rises instead of falling, the short seller faces potentially unlimited losses.
Short selling is commonly used by hedge funds and sophisticated investors to bet against companies they believe are overvalued or fundamentally flawed. High-profile shorts include those against Enron, Lehman Brothers, and various other companies that eventually collapsed.
Notable short sellers — like Michael Burry (of "The Big Short" fame) — have become billionaires or near-billionaires by correctly predicting major market events.