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In defense of truth on Overstock

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April 18, 2007 – Comments (3)

Retail price.

Overstock bargain!

Overstock.com (Nasdaq: OSTK) CEO Patrick Byrne has made a lot of hay about so-called corrupt analysts and their alleged ties to journalists. So I find it interesting that he hasn't piped up to denounce the latest fish story about Overstock, this one appearing on TheStreet.com.

It regards a fund that has "bet big" on Overstock, one run by money manager Arne Alsin. Alsin, you will recall, has in the past written some amusing Overstock puff pieces, like this one, containing predictions that, in hindsight, are shown to have been utterly wrong. Or this one, which is yet more disturbing, because it was published the day after Byrne promised investors a "big story breaking, next 24 hours" on our boards...

3 Comments – Post Your Own

#1) On April 18, 2007 at 6:37 PM, rjzlaw (< 20) wrote:

Seth:   

W/r/t your 04/18 discourse on OSTK, you will likely have to hold your breath until 04/25, when Mr. Byrne/OSTK will release first quarter results.  Apart from that, the tone you have taken in your article ( I am a betting man--I doubt seriously Dr. Byrne would dignify your remarks, essentially  'calling him out,' -- that's analysis?), let alone the title ("In defense of truth..."), wherein you have the temerity to infer you are advancing some 'significant' truths re: OSTK (You are not, and have not --you arguably advance truth w/r/t AMZN's margins, and OSTK's historical margins--the rest is your conjecture), suggests you have some ax to grind here.     

Moreover, you criticize Alsin, who, while in the 'arena,' has put $800,000 where his mouth is i.e.behind his opinion, while you have no position.  I always find that caveat amusing, when the 'analyst' is simply bad-mouthing. (Surely, you are short then-- or, own puts on this moatless stock, right?)    

Dr. Byrne didn't need to respond to your comments. The market spoke. Your 'article' was published, and the stock moved up .54-- 3.2%-- on increasing volume.  And indeed, the market has already spoken here on OSTK's future prospects.  

Read the following technical analysis, which I advanced to one of your compatriots over there at the Fool on the 8th.  No response as of yet, but I'll look to yours.  Meanwhile, you keep bad-mouthing OSTK, along with the rest of the 'fools'--ahh 'analysts.'  Hopefully, it will cause more greedy shorts to pile in to the life raft they seem to believe to be 'salvation'--i.e. a zero stock price--'fool's gold.' ---RJZ

Sent: Sunday, April 08, 2007 12:50 PM

Subject: Re: 04/05/07 article re: OSTK

Shruti:

Respectfully, I beg to differ with the general negative opinion you have rendered w/r/t OSTK in your most recent article.  A simple year over year percentage 'analysis' is not dispositive of any stock, let alone OSTK, when your analysis/perspective is from the bottom of the 'well.'  The literature I have read over the years (I have 27 yrs. experience) indicates small cap companies generally take about 22 months to turn around.  Review of the total picture/chart on a weekly basis for OSTK, since it began trading approximately June '03, reflects the first of 5 RS (relative strength) bottoms in April of '05. Starting that month and counting forward, we are now in month 24. And, the stock actually broke out 2 months ago (ergo 22 months) on Feb. 06, '07, the day after the most recent suit was announced, when 1.78MM sh(s)traded (out of 23MM) gapping up from 14.66 to 15.20 (intraday low) and closing out at 17.90 that day. That activity was a market confirmation of the legitimacy of the suit.          

Actually, OSTK bottomed the first week in November '06 w/an exhaustion gap to the downside through $15 on heavy volume. It then broke north on heavy volume the first week in February '07 (supra), closing the above gap. For the last 6 weeks the stock has traded essentially sideways to down, but well above the break-out point, on declining volume. All of the above action is part of a larger base that spans a little over 8 months going back to August of '06. And this most recent base is supported by all of the trading in the stock from its inception, through November of '04, prior to its breakout to the upside when it ran to $75./sh. Moreover, the "shorts" at 5.1 MM sh(s) now, constitute 138.4% of the non-insider/& non-institutional shares outstanding. Failure to close these positions over the last 8 months, while the stock based, wherein, there was ample opportunity to take those downside profits, constitutes nothing short (pun intended) of outright greed -- and, negligence. (Hogs get slaughtered.)  Add to this, all-time highs in short interest on both the NYSE and NASDAQ (see Tom Petruno LA Times article Sun. 04/01/07) and this is the prescription for a major move to the upside. Look for $33.5 sh. by Aug. '07-- if not sooner. And, I do have a position in OSTK.  Your response? ---RJZ

P.S.  Furthermore, it has been my experience over the years that stock analysts, when rendering an opinion, are exactly wrong at the wrong time.  Your article was published on the 5th; the stock broke north on the 10 day chart after 11:30 PST on Thur. the 6th, when volume surged from what would have projected to 78M for the day, to 259M--all up --short covering.  So, I am curious, how long have you been writing as an analyst?      

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#2) On April 19, 2007 at 9:41 AM, TMFBent (99.81) wrote:

Dr. Byrne didn't need to respond to your comments. 

You need to read the article again.

The market spoke. 

Sure did. Here's how Overstock has performed since I started writing about how horribly it's managed.

You seem to be interested in consipracy theories -- such as making baseless speculation that our articles may be timed to move OSTK. On the other hand, there is some interesting proof that this does happen with OSTK, and that it occurred because of something written at (not by) The Motley Fool:

Care to comment on the way Byrne was hyping his stock on our boards via promises of big news the day before a pumping article came from Alsin?

Oh, and to close, I'd be short Overstock if I could get shares to borrow and it didn't cost 18%. Got any you'd like to lend?

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#3) On April 20, 2007 at 2:09 PM, gembree (99.89) wrote:

Somebody out there is inexplicably selling deep-in-the-money puts on Overstock, if you're really looking for a way to short - buy at a strike of $30, expiration date Jan 09, and you have a share of bizarro OSTK, with a few quirks but essentially shortlike performance.

 I haven't been able to pull the trigger yet, but as it keeps going up 3-4% based on zero news and a high beta, I'm coming close.  As a bonus, when you buy an option instead of short-selling, you can rest assured that your actions do not jeopardize the rule of law.

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