It does seem a rather gaping hole in our legal/finance system that it's possible for a company to do a risky thing where the upside will occur soon, yet the downside will be delayed many years. Then the shareholders of the company can take out all the profits of the upside, walk away with all the cash and declare the company bankrupt when the downside happens.
I think the only proper fix would be to disallow companies from going bankrupt - ie. if a company has unpaid debts, the shareholders must pay them, and the share price can become negative. That forces everyone to build such risks into their models from the start, and company directors will be discouraged from taking such risky bets.
Other similar financial instruments exist - like stock shorts, futures contracts, lloyds names, etc.
This proposal seems to encourage "pump-and-dump" schemes to an even greater extent. Whoever gets left holding the bag will end up with shares worth negative dollars?
We saw last week how bad it is to hold excessively large short positions. This proposal would effectively make long positions have unlimited downside risk as well. I think it would have extremely deleterious effects on investment and the bad actors would still find ways to avoid the downside by leaving other shareholders holding "the bag."
It's a bit like taking over someone's lease for a house mid way through...
If there is damage when you take it over, you better ask the person you're taking over the lease from to pay for it, cos else it's gonna be blamed on you and you'll have to pay for it...
The same translates to buying shares with my proposal - you better inspect what you're taking on, because there might be costs associated.
