Will Byrned Investors Give Overstock.com Another Look?
by StockJockey
Tuesday, June 17, 2008 - 12:47 am
Overstock.com has been one of the more memorable battlegrounds on Wall Street since going public in May of 2002. The success of the Paypal IPO paved the way for Overstock to go public, but that was a special case, and the Street’s appetite for more mundane dotcoms was practically nil. Analysts were skeptical of the business model from the get-go:
“I’m not sure how much appetite is out there for a money-losing dot-com, particularly in this market,” Morningstar.com IPO analyst George Nichols told the E-Commerce Times. “PayPal was a special case.”
During the first three months of 2002, Overstock had revenue of just over $10 million and lost about $3 million. The company booked $35 million in sales during all of 2001. E-Commerce News
The company went public via one of WR Hambrecht’s Dutch auctions, a rarely used method of pricing an IPO that would gained some popularity in the wake of the internet bubble, when many stocks peaked on their first day of trading, only to burn traders and investors who failed to understand the mechanics involved behind opening the new issues for trading in the bubble.
WR Hambrecht and Cantor Fitzgerald priced 3 million shares at $13, raising $39 million dollars earmarked for capital expenditures and debt reduction. Rather innocuous comments would seem to indicate CEO Patrick Byrne, whose father was a successful businessman who counted Warren Buffett among his friends, who follow in his father’s footsteps.
Byrne even invoked a Buffett-ism, if I am not mistaken, as the company joined the ranks of the Nasdaq:
CEO Patrick Bryne says the stock price will take care of itself while the company stays focused on taking care of the business. “In the short term, the market is a voting machine; in the long term it`s a scale,” he says. “We offer a great value to consumers, and ultimately, in one way or another, that gets rewarded in the marketplace.”Internet Retailer
The stock quickly became a battleground, however, as analysts began to publicly question the business model and short interest in the name built rapidly.
Yes it got ugly fast, and Patrick Byrne quickly gained a reputation as the most reviled business executive in America, a fact he freely admits. Even to this day he is loathe to recommend his stock, and widows and orphans should probably follow Patricks advice and steer clear Overstock.com (OSTK-NASDAQ):
The stock held 2003 lows earlier this year and is testing resistance
I can’t suggest that people buy and in fact, sometimes I have gone out publicly and said, this is a pretty dangerous stock to own, because it’s being manipulated by very powerful people, and I am unpopular. A couple of years ago I was told by a well-known hedge fund manager that I had become the most hated man on Wall Street. He says that I could kill people and I wouldn’t be hated like people on Wall Street hate me. So I don’t go out there and try to convince people to buy our stock. They have to figure it out themselves......Seeking Alpha
I always like to say that every stock has its price, and if the valuation warrants, it might end up on my sheets. But if there has been an exception to that rule, and it has been based in Salt Lake City.
I have purchased several items on the company’s website, but have never owned the stock. But Patrick Byrne, who was recently exonerated by the SEC after a two year investigation, is out pressing the flesh and talking to investors about his business once again.
The stock certainly seems to be coming around, despite Byrne’s disclaimer, and his interview with the Wall Street Transcript might help you decide once and for all....has Patrick Byrne turned over a new leaf?
Patrick’s stock is on the mend, and while you don’t have to trade it, you certainly should read his interview.
And for those of you who caught Byrne’s bizarre interview with Becky Quick on CNBC’s Squawk Box several years ago, you can understand the one wish I have before I die.
To see Becky host Patrick on Squawk Box for the sequel.
Overstock.com Tries To Jump-Start IPO in Tough Market E-commerce News -----------------------------------------------------------------------------------------------------------------------
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Comments:
Hi StockJockey,
Thanks for the ambivalent write-up. At this point, I count ambivalence from anyone on Wall Street as progress.
You are confused on a couple key points in your piece, so I figure you’d appreciate me coming here and clearing them up.
You write, “Patrick Byrne quickly gained a reputation as the most reviled business executive in America, a fact he freely admits.” That’s false. I said that I became the most reviled businessman in Wall Street (or at least, that I was told that). Actually, what the hedge fund manager (a highly-regarded elder statesman of the industry and, I agree, a fine man) said to me, precisely, was, “In this town you’ve become the most hated man I’ve ever known. At first Wall Street thought so highly of you. You were a kind of Golden Boy. But now you could kill people and not be hated like you are hated around here.” And the data supported his claim. For example, Whitney Tilson invited me to speak at the Value Investors Congress in September-October 2006, but then rescinded the invitation when Chanos and Einhorn
protested, and said (according to him) that they would lead a hedge fund boycott of the conference if I were allowed to speak my views.
So you are right up to that point, but I don’t think it was correct for you to say, “in America.” In fact, for a couple years my experience was just the opposite: I could not believe how many places I go where people would come up and say hello, or send me a drink in a bar, etc. and tell me how much they support my taking on Wall Street.
Of course, in the last nine months or so, everything has changed. But then a year later, that is, last October, Brett Goetschius invited me to address the PIPEs conference. I told him about what had happened with Whitney, and he said, “No, in the last year there has been a shift in hedge funds. At least 50-60% of them get that you are right.” I went and spoke to an audience of 800 hedge funds, and he was right (it is available on-line: go to DeepCapture.com and watch “DeepCapture: The Movie").
In the interests of full-disclosure, I suppose I should mention that even what that guy told me about being hated was only partially true, even when he said it. From the start of my Mitzvah I got occasional messages of support from what I think of as the most revered figures in your industry (some of whom I had met along the way, some I had not). Example (direct quote): “I’ve been watching these XXXholes ruin the market for 20 years and wondered when someone was going to stand up to them. I might have guessed it would be you, Byrne.” Several other of the old-time legends around Wall Street sent similar words of encouragement.
Going further, perhaps it would clarify things for you to understand that the cover-up ran by trying to make it sound as though I was just some malcontent CEO complaining about his stock price, rather than a guy making deep systemic claims. For a very brief statement of what the Mitzvah has really been really about, read this half-pager:
http://www.deepcapture.com/cnbcs-ron-insana-patrick-byrne-and-the-miscreants-ball/
I was not aware of the progress you are making on Wall Street with some of the money managers. It is unfortunate that Chanos, et al, protested your appearance. He might have learned something from your speech.
I have been trying to take baby steps in your direction, but it is a hard sale to the people I speak with, as they have clearly read the headlines, but not really rolled up their sleeves.
But they are working off old, and perhaps inaccurate, stories.
I think the videos you did show a guy many people on Wall Street would, if not embrace, at least warm up to. Well done.
I think it would be major progess if your stock was judged like many, on earnings and cash flow generation. Any multiple discount might be erased, providing an opportunity for shareholders to enjoy the fastest money on wall street, as Nothing is sweeter than multiple expansion.
A sober interview with Becky might bring you full circle, and knowing Wall Street, they will buy the stock if they see a chance to make a buck. You have nothing but upside ahead, at least from a sponsorship standpoint.
Congratulations on the recent move higher, although I must admit the trading in the stock has often made little sense to me, as it has been more of a trading vehicle than investment.
Good luck to you, you have taken more risk and created more jobs than some of the people who sit back and criticize you.
Right now we can use all the help we can get.
I will monitor the investment case closer, going forward, although retail was never my sector, and weigh in over the next few months.
How is the quarter looking? Just kidding!
Good luck, sorry about the wordplay, or lack thereof.
SJ
PS-I will check out deep capture, have not yet.
Posted by on 06/17/2008 at 08:36 PM
SJ,
I would be delighted to go on with Becky. Since the last time I held up a sign, she has not sent me any invitations.
One of the most self-serving “regulators” of this decade.
SJ, it is refreshing to see an unbiased exchange of ideas between a journalist and Patrick from time to time.
Patrick, see, they’re not all big bad Sith Lord’s tools, are they?
Posted by on 06/18/2008 at 04:39 PM
It galls me to hear this incompetent egomaniac quote Buffet. Nothing could be further from Berkshire Hathaway than Overstock.com. I don’t think Warren would charge off on a jihad while one of his companies was sinking. Nor do I think he would buy back stock at $40-50 per share six months before it hit $15.
Maybe Byrne should spend more time fixing Overstock and less time doing Google searches for “Patrick Byrne”.
Posted by on 06/19/2008 at 01:31 PM
This came out today, and I might not get my wish of seeing a Squawk Box sequel.
Sorry I opened can of worms! I dont have time to follow all this nonsense.
http://tinyurl.com/67jgl7
With the USO Oil ETF on the verge of a puke (I hope) I can start driving to the mall again.
Posted by on 06/19/2008 at 05:56 PM
In Gary Weiss’s efforts to show that I am somehow “covering up” my involvement with DeepCapture.com, he apparently missed the statement in bold at the top of every page: “Patrick Byrne, CEO of Overstock.com, founded Deep Capture to bypass the ‘captured’ institutions mediating our nation’s discourse.” He neglected to mention that on the home page of DeepCapture, at the very top, there is a nice three paragraph introduction, signed by me. And he forgets to note that several dozen blogs I have written, signed by me, appear on DeepCapture. So, these are strange ways to cover up one’s involvement.
Let this stand for the general level of honesty of Gary Weiss. In fact, he has been thoroughly discredited in two pieces that have drawn quite a bit of attention.
The world would be a better place if there was less war (including in cyber-space) and more potash smoking. The price of sweet Texas crude might even be less.
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