Bet your shorts, page-3

In Australia, to "short" a company, you need to borrow the shares from someone else, sell them in the market with the idea being that you can make money if you then buy back the shares at a lower price to return back to whoever you borrowed the shares from. The process of shorting typically depresses the share price since it increases the volume of shares being sold (and shorters might be targeting other investor's stop-losses which generates more sell orders (that can also provide volume for them to buy back in at lower prices). They are really hoping they will freak out other share holders (they might even post on stock forums!) so they can induce panic selling to enable them to buy back. Of course, the flipside can happen; they short the stock and then the company comes out with great news and the share prices goes up. They still need to buy the shares back but now they are doing at higher prices than what they sold, and their demand increases the share price even further (which then only encourages other traders to buy more as well). This is known as a "short squeeze" as they are pressured to buy back, right at the wrong time.