Long OSTK, Short Byrne
Lest anyone doubt our stock selection approach is quantitatively driven, the following represents the positions of our Long/Short accounts:
QID $21.16 3%
BJ $39.14 5%
OSTK $22.64 5%
NAV $52.80 5%
ICE $122.08 5%
PCS $8.80 4%
We are 24% long, with a 6% short position in the QIDs. Hence, our net exposure is 18%.
Now, if ever you wanted evidence of the importance of being objective, you might note that the 3rd position above is none other than Overstock.com.
It is a testament to our lack of bias in stock selection in that we are long this 3rd tier retailer. Sure, the CEO is a loon, more interested with spinning conspiracy theories than running the firm. Yes, they have engaged in accounting fraud, probably are tax cheats, and have never truly been profitable.
Despite the fact that I personally think it is a steaming pile of shit, that the CEO is an asshole, and that the entire company is probably corrupt — it is in our portfolio. As a long position.
Go figure.
~~~
UPDATE: May 25, 2010 10:55 pm
Apparently, Byrne just dumped about 140,000 shares, or $3.2 million worth of the stock. I do not recall any prior sales (might this be his first insider sell?)
Is Byrne in possession of material insider information? Would he be so stupid as to sell the shares? (I doubt anyone could be that dumb).
Perhaps he sees a favorable outcome to the SEC investigation? Maybe he is raising money to pay a fine?
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May 25th, 2010 at 10:33 pm
Now you did it Barry! He’s gonna wreck his company just to prove you wrong!..:-)
May 25th, 2010 at 10:34 pm
And bank stress tests and VARs didn’t show a big deal either. Sometimes it works out ok. I think you will agree that OSTK is GI, so we will see what comes out.
May 25th, 2010 at 11:02 pm
Rather than hold his company’s stock, BR, I think there’s ‘plenty of other fish in the sea’ to do business with. Throw Overstock back before it “Enrons”…
May 25th, 2010 at 11:09 pm
how about some insight as to what qualities of OSTK made it show up in your quant screen, Barry?
May 25th, 2010 at 11:14 pm
BR@Is Byrne in possession of material insider information? Would he be so stupid as to sell the shares? (I doubt anyone could be that dumb).
Yes. He has already demonstrated that. Why on earth would your screens point to OSTK as anything other than a “Penny stock” situation.
May 25th, 2010 at 11:32 pm
Don’t hold back Barry. Tell us how you really feel. ;-)
May 25th, 2010 at 11:41 pm
Buy what you hate, short what you love. It’s a cold world out there. Nice job, Barry.
“Tell Mike it was only business. I always liked him.” LOL
May 26th, 2010 at 5:25 am
QID is a double short so add another 5% to that with 1% slippage. I’d put him at 13% long.
May 26th, 2010 at 5:27 am
“Mixed emotions, buddy. Like Larry Wildman going off a cliff in my new Maserati. “
May 26th, 2010 at 5:30 am
Why is my anchoring so bad? I see sixes, I see fives, I see dollar signs, and I want to add an extra 6% to his rundown. At a 3% double short, Barry’s explanation that he is 6% short is right on the money and I’m an idiot. Good luck.
May 26th, 2010 at 6:48 am
Patrick Byrne Pockets $3.1 Million from Dumping Overstock.com Shares While Trying to Stave Off Possible SEC Enforcement Action
Amidst an ongoing Securities and Exchange Commission investigation into financial reporting violations by Overstock.com (NASDAQ: OSTK), CEO Patrick Byrne’s 100% controlled High Plains Investments LLC dumped 140,000 company shares and collected over $3 million in proceeds during the last several days, according to SEC filings. This marks the first time that Patrick Byrne has ever sold any Overstock.com shares under his control, not a bullish signal to investors.
Meanwhile, the company is desperately trying to stave off an enforcement action by the SEC. Before I discuss that issue, let’s review some recent history.
Why the SEC is Investigating Overstock.com
So far, each and every initial financial report for every reporting period issued by Overstock.com from the company’s inception in 1999 to Q3 2009 violated GAAP or some other SEC disclosure rules. Likewise, every single audit report issued by PricewaterhouseCoopers, Overstock.com’s former auditors, from 1999 to 2008 was wrong turned out to be false, too. In addition, information uncovered by investigative journalist Roddy Boyd shows that managment deliberately concealed material weaknesses in internal controls over financial reporting as far back as 2005.
More recently, during 2009, I detailed how Overstock.com deliberately violated Generally Accepted Accounting Principles (GAAP) in recognizing income for recoveries from underbilled and overpaid fulfillment partners by improperly claiming that a “gain contingency” existed when it did not actually exist under accounting rules.
Under GAAP, Overstock.com is required to recognize income from underbilling and overpaying its fulfillment partners when such income was actually earned (before Q3 2008). By improperly claiming that a “gain contingency” existed, Overstock.com improperly recognized income as monies were recovered from the underbilled and overpaid fulfillment partners in future reporting periods on a non-GAAP cash basis. Therefore, Overstock.com improperly shifted income earned before Q3 2008 to future accounting periods (Q4 2008 to Q3 2009). In Q4 2008, Overstock.com improperly reported a $1.014 profit, instead of a $750k because of GAAP violations.
Creepy Judd Bagley
I notified both the company and the SEC of Overstock.com’s improper accounting for recoveries from underbilled fulfillment partners and later on, for overpaid fulfillment partners. Instead of properly complying with GAAP, Overstock.com CEO Patrick Byrne defamed me in various quarterly conference calls with analysts and investors, sent his paid internet stalker Judd Bagley to interfere in my divorce proceedings, and even had Bagley and spy on my family and other company critics (including our minor family members) using a fake Facebook name.
In September 2009, the SEC re-opened a previously closed investigation of Overstock.com after I notified them of violations of Generally Accepted Accounting Principles (GAAP) in the company’s reporting of recoveries from previously underbilled fulfillment partners.
In November 2009, Overstock.com fired Grant Thornton as its auditors after they recommended that the company restate its financial reports to correct GAAP violations, as I previously called for in my blog. In December 2009, KPMG replaced Grant Thornton as Overstock.com’s auditors.
On January 29, 2010, Overstock.com finally admitted that its accounting for recoveries from underbilled and overpaid fulfillment partners was “inappropriate” and that no gain contingency existed, as I previously reported in my blog.
On March 31, 2010, Overstock.com’s 2009 10-K report restated the company’s Q4 2008 financial report to show a properly reported net loss rather than an improper net profit, as I correctly said it should in my blog more than a year earlier. However, a few days later, Patrick Byrne falsely claimed to AP reporter Paul Foy that “Overstock’s accounting errors were generally conservative…and gave the company no advantage.”
In its Q1 2010 10-Q report, Overstock.com reported continuing material weaknesses in internal controls
May 26th, 2010 at 7:05 am
arghhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhh
around feb 8th the low around 11, i was ready to buy, and you posted a scathing op/ed about byrne, now i’ve followed ostk since the ipo, so i know some of the bs, not all, i passed on buying cause the post influenced me, we had already had a nasty sell-off, and since the stock always acts jiggy as hell, i passed, and of course i put it aside, a month later she’d added 50%, drats
May 26th, 2010 at 8:29 am
I guess this goes to show that even crummy companies could be buys if the price is low enough. A case of “hate the company, love the stock,” although in this case, maybe more like “I hate the company, my computer loves the stock.” :-)
May 26th, 2010 at 8:31 am
you give Byrne too much credit. If he was smart, would he be in the mess he is?
May 26th, 2010 at 8:39 am
BR, could Byrne be using you as a contrarian indicator on the stock?
May 26th, 2010 at 1:43 pm
Barry,
You’re not doing a very good job of “talking up your book!” You need to take lessons from PIMCO :-)
May 26th, 2010 at 5:07 pm
Barry,
I’m really not sure why you would want to be long on a company that you know for a fact isn’t run properly. Poor company management is the #1 item I look for in a company I avoid.
I suppose you are better at this than I am.