This is a bullshit argument. If a company falls apart, its equity value will crumble, short sellers or no short sellers.
Short sellers simply drive the price action faster. That's probably not a good thing for the equity holders, nor does it serve a function that wouldn't get handled without short selling enabled.
If something is worthless, people will figure it out organically and the price will follow. You don't need selling pressure by non-holders to get there. In fact, you don't need selling at all. Companies that fall apart don't go to zero by selling pressure, but by lack of buyers at the erstwhile price.
Short sellers simply drive the price action faster. That's probably not a good thing for the equity holders, nor does it serve a function that wouldn't get handled without short selling enabled.
If something is worthless, people will figure it out organically and the price will follow. You don't need selling pressure by non-holders to get there. In fact, you don't need selling at all. Companies that fall apart don't go to zero by selling pressure, but by lack of buyers at the erstwhile price.