RE: share price25 May 2018 13:29
Very briefly and I'm happy to be corrected on any broad brush statements, say the current price is 128p and you think the company is worth 150p, you buy shares (go long).
If you think that it is only worth 100p, and you don't own any shares, you can borrow them from someone who does (often an institutional investor), pay them a fee to borrow them, sell them now for 128p and then buy them back at a lower price (if you are correct that it falls in price) to return them to the person you borrowed them from.
As well as paying a fee to 'rent' the share, you also have to pay the original owner any dividends they would have received - thus any short sellers of PETS will have to pay 5p per share to the people that lent them the shares in a few weeks.
Shorting can be a self-perpetuating circle, as if you can access a significant portion of shares and flood the market, the price gets driven down. If all shorters want to close their short at once, it can drive the price up hugely as there can be more demand than the market can usually fill. It can be a very risky game - if you go long, you maximum loss is the cost of the share you bought, if you go short, there is no upper limit on your loss as the share could rise 2, 3, 10 times in value (in theory). The reverse applies to gains.