Very generous of the shorter! After somehow taking the price down after putting on their position, they offer an effective $2 for stock trading at $1.50. Given the evil reputation of the shorter, now they know the long holder is selling out, they should have approached the holder with a deal to buy all of what the holder is selling at $1.20 or else they will take the price down and make an even lower bid afterwards! The ruthless shorter then cements their reputation as someone not to be messed with.
The one hole in either theory is that once you put your position on, you can't move the price - you need other people to trade and make new prices, hopefully in favour of your position. I am certain that the fund manager wanted the stock to go up when they bought it and if was as easy as "taking the price up", they would have.
I am as aware as anyone that badness occurs in financial markets, but you have to come up with theories that are possible.
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