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Sell short after repeated SEC accounting letters

Sell short Sell When the SEC Keeps Questioning the Accounting · SEC staff comment letters

Selling short: it profits when the stock falls — shares are borrowed to sell and bought back later. It needs a brokerage account approved for short selling (a margin account), and you can lose more than the money you put in.

This sells the stock short, aiming to profit if it falls. When the SEC’s staff reviews a company’s filings it writes comment letters, and the whole exchange becomes public weeks after the review ends. On the day the letters come out, this sells the stock short for three months, but only when they ask about the accounting itself (how revenue is counted, non-GAAP numbers, write-downs, whether the company can keep going, its controls, or a restatement) and the staff needed at least three letters — the company’s first answer did not settle the question. It only counts companies trading at $5 or more with enough daily volume to borrow and short.

Technical details

Source: SEC staff comment letters (UPLOAD)

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Sell short after repeated SEC accounting letters vertical poster. This sells the stock short, aiming to profit if it falls. When the SEC’s staff reviews a company’s filings it writes comment letters, and the whole exchange becomes public weeks after the review ends. On the day the letters come out, this sells the stock short for three months, but only when they ask about the accounting itself (how revenue is counted, non-GAAP numbers, write-downs, whether the company can keep going, its controls, or a restatement) and the staff needed at least three letters — the company’s first answer did not settle the question. It only counts companies trading at $5 or more with enough daily volume to borrow and short.Sell short after repeated SEC accounting letters landscape card. This sells the stock short, aiming to profit if it falls. When the SEC’s staff reviews a company’s filings it writes comment letters, and the whole exchange becomes public weeks after the review ends. On the day the letters come out, this sells the stock short for three months, but only when they ask about the accounting itself (how revenue is counted, non-GAAP numbers, write-downs, whether the company can keep going, its controls, or a restatement) and the staff needed at least three letters — the company’s first answer did not settle the question. It only counts companies trading at $5 or more with enough daily volume to borrow and short.

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Updated Oct 16

On this page

How the test works

The planned holding period in these tests is 3 months (90 days), from opening to closing an idea.

  1. Sell short when it fires

    Sell borrowed shares at the next trading day’s close after the record posts.

  2. Hold 3 months

    The same hold for every idea, with no target. One exception: in these tests a short is bought back early if the price doubles — a −100% result.

  3. Close it 3 months later

    Buy the shares back 3 months after the sale, on the next available trading close.

Every number on this page uses this sell rule — the other sell rules we tested are under “The full test results and the math” below.

How it did in past tests

Research only — not yet confirmed by new trades

Publication check: Research only

Not passed yet — 4 of 16 checks:

  • Some trades have no price we could check, often at companies that later stopped trading. The range shown counts only the priced ones; counting the rest at a poor result pulls its low end below zero.
  • It needs at least 20 finished trades on 10 separate days after the rule was frozen.
  • Some of those new trades are still open; each has to finish its full hold.
  • Those new trades then have to beat similar stocks after costs, by more than luck across every rule we tried.

Passed — the other 12: Current calculation · Public disclosure dates · Complete finished trades · Every trade compared · Enough separate trading days · Positive edge after costs · Survives without the best year · Survives without the best three stocks · Survives higher costs · Rule frozen before the test · Rules tried alongside it counted · First new signals set aside.

Tested exit: 3-month hold. Historical results alone do not approve a rule for publication. New event tests include an estimated 0.20 percentage point round-trip trading cost, with a 0.50-point stress check.

New trades so far: 0 finished, across — separate days after the rule was frozen.

0 signals set aside across 0 disclosure days; 0 still need complete results. Missing results stay in the count.

Average difference in past tests+2.4 percentage pointsvs selling similar stocks short, over 3 months

Left: did worse · right: did better. Zero matches the comparison. pp = percentage points; the scale adjusts to include the result.

In past tests, selling each stock short made
0.0%
on average over 3 months · 932 tries
Selling similar stocks short instead returned
−2.4%
the short position did 2.4 percentage points better
Made money in
462 of 932
tries (50%)

932 tries finished the 3-month test · 10 still open · 2,583 signals ever

Past results don't predict future ones.

Similar stocks means the index fund for each idea's sector — or the S&P 500 when we can't place its sector. (The S&P 500 for 17 of 932 tries here.)

How it did against similar stocks2.4 percentage points better than selling similar stocks short — over 3 months
Paid for borrowing the shares?Yes, about 0.6 percentage points off the average. Every figure above already takes it out. It is our estimate, from how easy each stock was to borrow. Without the fee: 3.0 percentage points better than selling similar stocks short.
Range for the average (95%)+0.6 pp to +4.2 pp vs selling similar stocks short — the range the average probably falls in, not a best-to-worst case
Tested on enough tries?932 tries on 717 separate days ✓ enough
Works in different markets?37% from a single year ✓ spread across years
Spread across many stocks?6% from a single stock ✓ broad
Still works without its biggest winner?+2.5 pp vs selling similar stocks short without BAND ✓ holds up
How we grade →

The 5 newest of 932 finished ideas: 3 of 5 beat selling similar stocks short — one block each, newest first

  1. YSS · Jul 15, 2026 · Return +64.5% · +58.4 pp vs similar-stock shorts
  2. SPCX · Jul 14, 2026 · Return −21.5% · −14.5 pp vs similar-stock shorts
  3. SHAZ · Jul 6, 2026 · Return +38.9% · +48.5 pp vs similar-stock shorts
  4. FG · Jul 1, 2026 · Return +18.6% · +17.5 pp vs similar-stock shorts
  5. PRU · Jul 1, 2026 · Return −5.4% · −6.5 pp vs similar-stock shorts

did betterdid worseno comparison

YSS · Jul 15, 2026 · Return +64.5% · +58.4 pp vs similar-stock shorts

Inspect all 5 displayed outcomes

pp = percentage points above or below the comparable short-position return.

  1. YSS · Jul 15, 2026 · Return +64.5% · +58.4 pp vs similar-stock shorts
  2. SPCX · Jul 14, 2026 · Return −21.5% · −14.5 pp vs similar-stock shorts
  3. SHAZ · Jul 6, 2026 · Return +38.9% · +48.5 pp vs similar-stock shorts
  4. FG · Jul 1, 2026 · Return +18.6% · +17.5 pp vs similar-stock shorts
  5. PRU · Jul 1, 2026 · Return −5.4% · −6.5 pp vs similar-stock shorts

Ideas for the week of Oct 12

This week's list isn't set yet — it's set on the first fresh data of the week of Oct 19.

This rule published no ideas for the week of Oct 12.

Every idea

Results under the 3-month hold · 10 still open · 932 finished · each idea's buy-back day is 3 months after it fired · an open idea shows its result so far · a short position’s result is what selling the stock short made.

YSSFinished
Final return
+64.5%
vs similar-stock shorts
+58.4 pp
Dates & source
Fired
Jul 15, 2026
Exit date
Oct 13, 2026
SPCXFinished
Final return
−21.5%
vs similar-stock shorts
−14.5 pp
Dates & source
Fired
Jul 14, 2026
Exit date
Oct 12, 2026
SHAZFinished
Final return
+38.9%
vs similar-stock shorts
+48.5 pp
Dates & source
Fired
Jul 6, 2026
Exit date
Oct 5, 2026
FGFinished
Final return
+18.6%
vs similar-stock shorts
+17.5 pp
Dates & source
Fired
Jul 1, 2026
Exit date
Sep 29, 2026
PRUFinished
Final return
−5.4%
vs similar-stock shorts
−6.5 pp
Dates & source
Fired
Jul 1, 2026
Exit date
Sep 29, 2026
StockFiredStatusBuy-back dayResultvs similar-stock shorts (pp)
YSSJul 15, 2026FinishedOct 13, 2026+64.5%+58.4 pp
SPCXJul 14, 2026FinishedOct 12, 2026−21.5%−14.5 pp
SHAZJul 6, 2026FinishedOct 5, 2026+38.9%+48.5 pp
FGJul 1, 2026FinishedSep 29, 2026+18.6%+17.5 pp
PRUJul 1, 2026FinishedSep 29, 2026−5.4%−6.5 pp

pp = percentage points: the short-position return minus the comparable short-position return. A dash means the comparison is unavailable.

Showing 5 of 942 ideas

937 more ideas, each with its result
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The full test results and the math

pp means percentage points: the difference between two returns. Actual returns are shown in %.

Average result (3 months)
0.0%
range for the average (95%): −1.9% to +1.8%
Edge over selling similar stocks short
+2.4 pp
range for the average (95%): +0.6 pp to +4.2 pp

Held a year instead (selling short): −9.9% on average (906 tries).

Steadiness (Sharpe ratio) 0.00 — choppy: how even the results were from one try to the next.

Every buy-back rule we tested

Every sell rule we tested, side by side, comes with membership.

Risk and style checks

  • After style factors (market, size, value, momentum…) the edge is −0.4 pp instead of +2.4 pp — the edge is mostly those tilts. Tilts: Size −1.13 · Investment −0.46 · Market −0.46 · R² 0.09.
  • The stocks it picked trade a median $26.8M a day; 0% of its ideas were in thin stocks (under $2M a day).
  • At one percent of that volume a trade is about $268K; with 10 ideas open now, an equal-weight book is about $2.7M.
  • The edge by market fear on the day it fired (the VIX): calm +6.1 pp (160 tries) · normal +3.7 pp (322 tries) · stressed +2.1 pp (61 tries).

How we test and grade every rule →