As you say, 400k short on Tuesday. IMO that means didly squat. The % of capital and short as % of volume are what matter and in this case, are zilch.
On Monday, there were some 38 million shares traded (on the ASX alone, dont have Chi-X data) on the Tuesday, another 18 million.
Of that 18 million, someone or several people - correctly it turned out - punted that the stock would fall. So they took a short position. That 400k units, ~$200k in nearly $10million traded will have had no bearing on the days trading. For starters its not disclosed immediately, so no getting in the heads of holders.. they just placed a bet and won. They may well have covered now.
As @herbalist noted, the 'damage' shorts can do is when they bet againts (place their positions) then start a media, market, community fear campaign .. basically just the opposite of a hype-fuelled run! .. everyone sells, fuels more
selling .. they close out their shorts and wander away profiting. A rarer, but not unknown practise.
The fear of a large short position on a stock is that 'the shorters must know something we dont' .. ie: the same premise that a person or group has taken a 'substantial holding' in a company is often viewed as a positive as they 'must have researched it well and know its going to go well' approach.
In the micro-midcap space is unusual to be able to, or see significant shorting. As I mentioned before, punters claiming the shorts are ruining things are generally just looking for reasons their thesis of the stock heading north isn't coming to be.
