With EPS of negative $3.14, Overstock.com CEO Patrick Byrne is regularly named as one of the worst CEO’s; as MarketWatch’s Herb Greenberg writes, “Byrne has done an atrocious job, proving himself inept at running a public company. And while his idea for Overstock is intriguing, his execution has been a failure, especially relative to what he led shareholders to expect. Worse, he has spent shareholder time and money using innuendo and lies to create a conspiracy theory that includes journalists (including yours truly), regulators, politicians and others as his company’s performance plummeted.” Overstock, apparently unable to make money through its business plan, has a new business plan: sue investment banks for $3.5 billion in California state court, blaming them for the 77% decline in stock price. The suit alleges shenanigans on controversial practices of naked short selling, but the economic theory of price manipulation and damages is simply bogus: if the perpetually-money-losing Overstock were really worth billions more, investors would have every incentive to squeeze the short-sellers, who don’t have the market power to manipulate the price. Forbes writes a sympathetic and unskeptical account of the lawsuit.
Disclosure: I lost an embarrassing amount of money investing in Overstock in 2006 by failing to sell it immediately when Byrne started blaming the company’s problems on short-sellers.
One Comment
Whether Byrne is a good or bad CEO is irrelevant to the naked short question and, more importantly, the failure to deliver. If I decided to actually buy Overstock stock, I expect to receive my shares for voting, dividends, and to resell when I wish.
Naked shorting coupled with failure to deliver is a con job no different that trying to sell the Brooklyn Bridge. I am selling what I don’t have and can’t deliver.
Please don’t shoot the messenger and ignore the message.
Rick