If they spread good news about a bad company (ie, spreading sentiment in bad faith, as you called it), after acquiring a long position for that company - it means they are pushing resources into that company. Those resources are not endless. There is only a limited amount of capital flowing out there. If the capital goes to a bad company, it means that a good company somewhere did not get the capital that they would have otherwise gotten. It's just as bad.
The issue here is spreading sentiment in bad faith. If someone is doing it, they are affecting the market and enterprises in it, in a bad way. The good guys make less (and go out of business sometimes), and the bad guys make more money and get more attention, stealing it from the ones who truly deserve it.
The downside is not that some naive investors lose money. The downside is that a better project will not get the money it really needs, and instead that money will go to a worse project with better false marketing - thus slowing down the overall progress.
Whether this happens while going long or short positions - doesn't make much difference.
It's a relatively compelling argument, but I'm not convinced that the reality is as "zero-summy" as you're suggesting for a few reasons (off the top of my head):
a) I'm not convinced that it's as difficult/expensive to spread FUD as it is to spread whatever the opposite of FUD is.
b) I'm not convinced that different classes of investors respond in the same ways to FUD and whatever the opposite of FUD is.
c) I'm not convinced that different classes of investors have the same access to tools that allow them to "buy long" and "sell short". This may be on the way to changing, but currently even e.g. Robinhood does not support short selling.
I say "not convinced" because I honestly don't think I have the answer to this, but if the answers to the above questions go a certain way that I think is fairly plausible, it seems that the net effects would include a disproportionate burden on disruptive/innovative ventures that are especially vulnerable to FUD, and an increase in wealth inequality as capital flows to more sophisticated investors. Neither of those things are great.
The issue here is spreading sentiment in bad faith. If someone is doing it, they are affecting the market and enterprises in it, in a bad way. The good guys make less (and go out of business sometimes), and the bad guys make more money and get more attention, stealing it from the ones who truly deserve it.
The downside is not that some naive investors lose money. The downside is that a better project will not get the money it really needs, and instead that money will go to a worse project with better false marketing - thus slowing down the overall progress.
Whether this happens while going long or short positions - doesn't make much difference.