What does "short selling" mean? Behind the case involving the Italian company, there could be a speculative financial operation

Recently, the stock of Brunello Cucinelli, the Umbrian company specializing in cashmere garments named after its founder, has dropped by more than 17 percentage points. The decline stems from allegations circulating in recent days, accusing the company of selling its products in Russia despite European sanctions. The European Union’s sanctions, imposed as retaliation for the invasion of Ukraine, prohibit, among other things, the sale of luxury goods in Russia—though within certain limits. The accusations against Cucinelli have been particularly supported by a financial analysis firm, Morpheus Research—founded in 2025 and focused on identifying violations and misconduct in the financial market. The firm has released a report regarding the issue involving Cucinelli. Moreover, Morpheus Research claims that Cucinelli’s exports to Russia have even increased since the sanctions were introduced.

Cucinelli initially responded by issuing a statement to reassure investors, asserting compliance with European regulations regarding activities in the Russian market. The Italian company highlighted that the value of exports to Russia dropped from 16 million euros in 2021 to 5 million euros in 2024—the impact of this market on the company’s revenue is thus very low, having decreased by more than two-thirds since the invasion of Ukraine. According to Cucinelli, shipments to Russia remain within the price limits permitted by the European Union. Luca Lisandroni, CEO of Brunello Cucinelli, speaking to the Financial Times, noted that neither Italian nor foreign customs authorities, nor the company’s internal controls, have ever flagged the irregularities pointed out by Morpheus Research.

What do "short sales" have to do with Cucinelli

To contextualize Cucinelli’s stock market drop, it’s necessary to discuss “short sales”. This practice is indeed one of the fundamental aspects of how financial markets operate—though it can be challenging to grasp for those unfamiliar with stock market activities. In simple terms, short sales are a speculative financial operation where one bets on the value of a certain stock declining in the short term. Those who engage in such operations are called “short sellers”, and if the stock value decreases, they generate profits—conversely, if the value rises, they incur losses. A key aspect of short selling is that it involves borrowed shares: short sellers borrow them without paying for them, then sell them at a certain price, waiting for the value to drop before buying them back at a reduced rate. They then return the shares to the lender, profiting from the difference. It’s institutional investors (such as funds or banks)—through brokers—who decide to lend shares to short sellers, doing so because, when the shares are returned, they expect to receive a substantial interest, agreed upon at the time of lending, which increases with the loan duration. Not surprisingly, however, short sales are deliberately very rapid operations.

As reported by MilanoFinanza, Morpheus Research was recently founded by former members of Hindenburg Research, “a well-known short-selling firm that had targeted high-profile companies before being dissolved in January.” “Some believe there’s a clear strategy behind these accusations [against Cucinelli]: publishing detailed reports on alleged corporate issues while holding ‘short’ positions betting against the stock,” reports ClassCNBC. According to some observers, certain research firms not only publish critical analyses of specific companies but also take bearish positions on the stocks they analyze. This practice has often been debated among financial industry insiders. “For now, these are allegations to be verified, but the market has reacted strongly nonetheless. This case has reopened the debate on the role and limits of bearish speculation in regulated markets,” continues ClassCNBC. In this context, discussions have resurfaced about bearish speculation and the transparency of financial markets—similarly to the notable GameStop case. The accusations from Morpheus Research have evidently had a significant impact on Cucinelli’s stock, despite the company’s firm denial and its announcement of legal action to protect its reputation.