What your describing still sounds incredibly dodgy.
The price of anything is a result of its some intrinsic value and the volume of supply. So a precious stone is valuable because of its beauty, but also because it's rare. If someone mines a billion such stones, it won't affect their individual beauty, but it will certainly reduce the price someone is willing to pay for one.
Now, you seem to be saying that short selling is a signal about intrinsic value, but the process you describe, whether you want to call it counterfeit shares or fractional reserve shareholding or whatever also messes with the valuation by inflating the supply. If there are more shares of a given company available, those individual shares will be worth less.
The result would seem to be that naked short selling at volume will create a self-fulfilling prophecy. You can drive the price down simply by inflating the supply, regardless of whether the company is well managed or not. Maybe you start with badly-managed companies, but there's always going to be a perverse incentive to target any company so long as you can manipulate the supply enough to force a price drop. If you care about the market as a measure of company health, that doesn't sound like a good idea.
The price of anything is a result of its some intrinsic value and the volume of supply. So a precious stone is valuable because of its beauty, but also because it's rare. If someone mines a billion such stones, it won't affect their individual beauty, but it will certainly reduce the price someone is willing to pay for one.
Now, you seem to be saying that short selling is a signal about intrinsic value, but the process you describe, whether you want to call it counterfeit shares or fractional reserve shareholding or whatever also messes with the valuation by inflating the supply. If there are more shares of a given company available, those individual shares will be worth less.
The result would seem to be that naked short selling at volume will create a self-fulfilling prophecy. You can drive the price down simply by inflating the supply, regardless of whether the company is well managed or not. Maybe you start with badly-managed companies, but there's always going to be a perverse incentive to target any company so long as you can manipulate the supply enough to force a price drop. If you care about the market as a measure of company health, that doesn't sound like a good idea.