In theory, that's what they do. In practice they are credited with utterly destroying several companies that might have been able to survive otherwise. No one knows for sure if they would have made it, but they had absolutely no chance to survive with short sellers in the mix. The stock market often encourages a herd mentality which isn't necessarily based on reality (e.g. the dot com bubble of the mid-90's). Short sellers have a way of sending that herd mentality into overdrive.
If your company is on solid footing, it shouldn't matter if your stock price is zero (that'd be great, actually; you could buy back your whole company). Your argument is functionally equivalent to saying that any number of unfunded and dead startups could have made it if only they'd gotten a $5M Series A round. They didn't because investors didn't think it was a good bet. Public companies that need cash infusions to survive face the same situation -- they are at the mercy of their prospective investors. There is nothing wrong with this.
