General Discussion, page-470

Institutional short sellers don't anticipate the price going down, they actively push the price down through algorithmic trading and targeted/timed attacks, making money along the way. They can, and do, artificially inflate the share price first then crash it in the same way and can do it repeatedly until all confidence is lost in the share price. In the process of doing so they ruin the reputation of the stock so future investors - mainly retail, become wary of investing in such a stock, even though the fundamentals of the company may be excellent. This also affects the company's ability to raise money and you get more dilution of shares because they have to raise at a lower price. This can ruin an otherwise "sound" company or cause it to take longer to realise it's potential because of it's lesser ability to raise the necessary funds to develop products or the business itself.
Unfortunately your theory regarding a "sound" company frequently doesn't hold true. Many people do lose their shirts because they and the market is manipulated by these institutional shorters - they truly are the vultures of the ASX.

If you want to see if a stock is being shorted, google Shortman and plot the share price against the number of shorts and you can make your own conclusions. It doesn't take many shorts to move the share price. Unfortunately the figures on Shortman are 4 days old and reporting to the ASX is "optional" AL3 is a good example. Look particularly at large SP movements the short numbers can go up or down correspondingly.