Comment by Over2Chars

I think the prospect of an impending SEC or other investigation is only one factor in stocks losing value.

They highlight inflated sales and financial irregularities like a chain of companies that engage in self-dealing, but are portrayed as independent to hide their real ownership, and so on.

If you believe what they say, your faith in the company is shaken because they're pulling a con job on you to invest in them and believe their story. If the SEC investigates that just supports the claim that it's a con.

If they don't investigate - for whatever reason - it doesn't mean that it's not a con and you won't lose all of your money believing it.

So a change in the regulatory environment is only one element.

For example, the Modhi/Adani thing is outside the reach of the SEC. And after watching a piece on it, apparently shorting it was amazingly tricky, and they had to go through some Singaporean markets to arrange a short position.