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February 28, 2007 – Comments (6)

Seems the law Patrick Byrne shoved through Utah's legislature last May will get repealed, as even the easily-fooled crowd that bought Byrne's "naked short" story has come to realize it doesn't have a prayer of defending the law. Quite simply, Utah doesn't have jurisdiction over these matters. Federal law does. The Utah lawmakers finally came to realize this, and even admitted that the ONLY people who claimed otherwise were those in the Overstock camp.

Byrne's reaction? Claim another conspiracy, accuse his former legislative ally of being compromised by the brokerage industry, and try to start a fistfight.

Oh yeah, and have OSTK's lawyer pledge shareholder money to defend the doomed law. Read the entire, sordid tale here:

http://www.sltrib.com/business/ci_5312826

Just one more piece of evidence that Byrne runs Overstock in the interests of his ego, not the financial interests of shareholders.

Sj

6 Comments – Post Your Own

#1) On February 28, 2007 at 11:02 AM, CycleFreak7 (< 20) wrote:

Another reason why the increase in OSTK's stock price is completely inexplicable. It simply has to come down eventually. But for now, it's an underperform pick in my caps that's not doing too well.

On another note, OSTK is not the only company grumbling about hedge funds, naked shorting and other stock manipulation schemes.

The CEO of GROW (U.S. Global Investors) has mumbled something wishing to take his company private because he's tired of all the shorting (naked & genuine). I believe that's why they pushed for a stock split and special $0.25 dividend per post-split share. He wants to drive the price up to squeeze the shorts.

There was also another pharmaceutical company in that lawsuit along with OSTK (the name escapes me).

If it's not happening, then why the escalating "failure to deliver" transactions being reported?

Unregulated hedge funds, trading in "dark zones", naked shorting are the bane of the small investor.

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#2) On February 28, 2007 at 12:15 PM, TMFBent (99.82) wrote:

You've swallowed an awful lot of baloney, there, my friend.

The bane of small investors is a lot of hype and a dearth of brains. That's how Phil Saunders (Bob O'Brien) lost millions for the NSS brigade that was betting on Novastar, and it's how charlatans have always fleeced small investors.

If you truly believe the market is that crooked, there's no rational reason to play in it at all.

And if you think Patrick Byrne, who's been amazing capable at being wrong, is right on this one, you're betting against an awful lot of evidence to the contrary.

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#3) On February 28, 2007 at 12:20 PM, TMFBent (99.82) wrote:

As an aside, in the latter half of this missive, I mean the proverbial "you" here, not you personally.

But I urge you to be a lot more skeptical about the unsubstantiated claims that unregulated hedge funds are the bane of small investors. There's slime there, as there's slime everywhere. But the majority of crookedness uncovered by the SEC has little to do with shorting. And when it does -- as in this case (http://www.s.../lr20017.htm) -- it's someone shorting on foreward knowledge of a deal.

The real scandal is, as always, good, old-fashioned cheating and chicanery.

Sj

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#4) On February 28, 2007 at 3:28 PM, CycleFreak7 (< 20) wrote:

Perhaps I'm too much of a conspiracy theorist sometimes. But I do believe that when billions of dollars are stake, men will do whatever it takes. Period. Ethics and legalities are completely beside the point.

On the other hand, I don't believe that crookedness in the market is so pervasive as to be able ruin the chance for gains as a small investor. Otherwise, you are correct - I would not be "playing" in the market at all.

Slimy hedge fund managers cannot possibly keep a truly good company from trending up over the long haul. Those are the types of companies I hold in my portfolio.

However, in the short term, they have the resources to throw 10's of millions of dollars worth of short-sells at a single stock. The idea is to shake other investors (usually of the small, individual type) out of their trades by hitting stop-loss levels. Then they buy up at the reduced prices while the stock trends up again, making money as it drops and as it gains.

Mind you, I'm well aware that short-selling is perfectly legal. But when these guys sell shares that haven't actually been borrowed, then we have a serious problem. As I said, this causes the failure to deliver. If naked shorting never occurred, then failures to deliver would be so small as to be negligible.

As it stands, they are not.

I'd also add that the reason OSTK has been short-sold so much is that it's a crappy company that really should be trending down toward bankruptcy. So don't blame the people shorting the stock, blame OSTK's management.

OK, enough about that. And, oh yeah ... No! I do not wear a tin-foil hat ;-).

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#5) On February 28, 2007 at 4:18 PM, TMFBent (99.82) wrote:

I can remedy that! I make a very fine tinfoil hat. (I'm not kidding. Making strange hats is something I got into one time. We had some GREAT ones at Halloween a couple years back.)

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#6) On February 28, 2007 at 5:58 PM, Allstar13913 (99.83) wrote:

I have a question... What happens when a stock is sold short and then is not delivered, thereby making it a naked short? Does the stock reflect the trade, even though it can't be completed?

I'm just curious...

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