Tuesday, March 22, 2005

Overstocked and Underauctioned, Part Two

A full month has elapsed since Overstock.com CEO Patrick Byrne issued his "MOMENT TO STRIKE" bulletin urging his auction foot-soldiers to "HELP CONTACT EBAY BUYERS" to take advantage of eBay's fee increase blunder.

Quothe the CEO: "As a result of these dynamics [eBay's fee increase combined with Overstock's fee decrease], our listings have soared from 50k to 90k in two days. The quality of listings is excellent. "

Well, we now have more than just two days' worth of data to determine the potential boost to Overstock's auction site—we have thirty. And the results are not promising for Overstock.com.

Overall listings on the Overstock auction site, by my count, are now in the 150,000 range, with a handful of categories (jewelry most notably) showing continued growth and a majority of others (coins, consumer electronics, crafts among them) not.

Clearly, the early momentum—40,000 of new listings the first two days after eBay's price increase—did not continue. (I do not have daily data stretching back to Bryne's "MOMENT TO STRIKE" proclamation, and welcome it here from anyone who does). Otherwise, Overstock's auction listings would be far higher than 150,000.

In addition, the individual categories themselves do have not much action, when measured by the percentage of listings with more than one bid.

In coins, for example, only 268 out of 2,666 recent listings—just 10%—had more than one bid. Pottery and glass, only 10 out of 2,341…not even 1%. Antiques were slightly more successful, with 56 two-bids or more listings, out of 1,161—just under 5%. That lack of participation is not a good thing, and goes a long way toward explaining why Overstock's auctions appear to have little traction.

Comparable data for eBay is impossible to calculate unless you have no life, because the eBay listings are so vast (205,000 in antiques alone, which is greater than all of Overstock's listings). I would suggest to the Conspiracy Theorists who devote so much of their lives to detailing here and elsewhere the rambling, incoherent, paranoid fantasies they have constructed regarding naked short-selling to explain movements in Overstock.com's stock price, that they divert just a few dozen hours of that time to looking at actual data such as the Overstock auction listings. Perhaps they can show where my calculations have gone wrong.

In any case, we will explore further Overstock.com auction data in Part III. For now, it would appear Patrick Byrne's “MOMENT TO STRIKE” has come, and gone, without sparking much of a fight.

Jeff Matthews
I’m Not Making This Up


Its_strange said...

Is this auction data behind the 10% slide in the stock price over the last month or short selling as Bob suggests on the OSTK yahoo message board ?

I wonder if you can get a steal of a lifetime on OSTK's jewelry auctions ?

bob obrien said...

Well, Jeff, I see that you are still up to your old tricks.

Let's see, how to proceed...

We can start with your assertion that the naked short selling observations are rambling, incoherent, paranoid fantasies.

Now, I know you'd like to have the truth defined by your use of the declarative, i.e. that because you say it, it must be so. Thus spake Jeffasuthra. 'Fraid not.

Let's break down the arguments so that you can understand and the folks at home can follow along. You claim that they are incoherent, and rambling, and paranoid. As far as coherence and rambling, let's examine the assertions:

1) The Reg SHO list is a memorialization of companies that have been abusively naked shorted beyond a threshold of half of a percent of their total outstanding shares, as well as over at least 10K shares.

2) Naked shorting, i.e. failing to deliver, is illegal for all but market makers, and even then if used as part of a manipulative price depression scheme, illegal under 10(b)5.

3) Abundant data exists documenting that failing to deliver is a prevalent, systemic issue. In the Compudyne case, over a third of the company's's stock was sold naked by a hedge fund in 975 instances of failed trades, where not one was caught or stopped by the system. Bear Stearn's General Counsel is on record acknowledging that regulators have been indicating that naked shorting is a huge and growing problem, caused by the failure to observe the rules by the brokers and clearing entities, and their customers the hedge funds.

4) As an equation, the argument could be presented like this: Illegal naked shorting = unlimited excess supply of unauthorized shares = INS. INS > demand = price depression (where INS will always be greater than demand by virtue of the unlimited nature of it, thus INS = demand (D) + >1.)

Is any of that hard to follow? Ability to sell counterfeit shares in virtually unlimited quantities will always exceed a finite demand, thus resulting in a depression in PPS?

If some part of that is confusing to you, which part is it? Where does the ramble or incoherence come in, or for that matter the paranoia? OSTK has been on the Reg SHO list since January 27, and it hasn't come off, so contentions that it's "all in our heads" don't jive with their presence on the list, nor do notions that the rules are being enforced.

For more of the "rambling, incoherent paranoia" I would encourage interested readers to visit the www.ncans.net/byrneshort.htm page where Dr. Byrne lays out the case in a clear, linear, concise manner.

So Jeff's censorship of previous posts and hyperbole notwithstanding, in this case he is clearly just making it up. What else is new? He deleted a host of posts earlier using the thinnest of pretenses that one of the 5 or 6 posts had an offensive word (I had the temerity to express something as a joke which he found offensive - although I missed the comprehensive list of T's and C's wherein all posts would be removed if the moderator found one word in one post offensive) - it would appear to me that Jeff has an agenda to A) attack Dr. Byrne and OSTK; and B) Demonize anyone connected to the anti-naked shorting issue.

Why someone would have an agenda that is against OSTK is their own business (is Jeff short or are any of his hedge fund cronies short?), but why someone would deliberately obfuscate the facts around the violation of a host of laws and attempt to paint the demand for enforcement of those laws as nutty, incoherent behavior is more troubling.

Now, if any portion of this seems rambling, or incoherent, or delusional, I invite Jeff to point out which part. Don't hold your breath - he likes "facts", but only select facts. Note that he avoids the Compudyne case facts and the Bear Stearns Counsel facts and the Reg SHO list facts like they are a poisonous viper.

I fully expect this to be censored away as were my previous posts, so I'll begin a log of Jeff's censored posts available at the www.ncans.net website, or perhaps at the overstock.com bulletin boards. Just so that folks can go back and see what Jeff has deemed so offensive and off-limits that it deserves censorship. And then you can refer to that site again and again to verify what Jeff is in fact making up.

BelowTheCrowd said...


Explain how this is relevant to the topic of Jeff's post, which is OSTK's auction business?

Some of us would actually like to discuss the business, without having individuals like you hijacking every thread to rant about a topic that is of no interest to us.

Don't have any money in this particular game (OSTK violates too many of my rules for entering a position -- either long or short). However, I do have money in many other related investments, and wish you and your ilk would actually concede to discussing the business aspects sometimes.

Its_strange said...

Will OSTK's auction data influence their future skunk works projects we should be seeing shortly ?

BelowTheCrowd said...

One thing that differentiates eBay is the large numbers of professional sellers and "stores" out there. I don't have the numbers handy, but they are a huge chunk of eBay's revenues and auctions and they are also the highest margin customers for eBay.

I don't see OSTK having as an alternative for these guys. While they grumble about eBay's costs, they are also a pretty captive market that has few alternatives. Yes, some of them might conceivably set up Yahoo stores instead or as well (though the costs there are also large), and a very small number are big enough to sell from their own websites, but for most of them it's eBay or nothing.

YHOO had to give up on auctions because they couldn't make it work, despite their reach.

Amazon still has auctions, but it's a tiny part of their business and they work mostly because they are well integrated into the overall retailing business -- a way to get used products cheaper than the new versions.

Virtually the only auction sites I am familiar with that are successful tend to be niche focused, often selling things that don't do well or can't be sold on the general purpose sites. (Firearms, for example.)

Were I still holding eBay OSTK would be the least of my concerns. (That company has enough real problems, but significant competition isn't one of them.)

Jeff Matthews said...

There's not a face card in the hands of the Patrick Byrne acolytes. This is made clear by "Bob O'Brien" and his paranoid rehashing of the naked shorting antics of the few--as opposed to the serious investigative efforts of the many professional short sellers.

In reading "Conspiracy of Fools," the excellent, detailed look at the Enron fraud, I am struck by the fact that Enron CEO Ken Lay--who seemed truly unaware of the fraudulent dealings of his CFO, Andy Fastow--blamed his company's troubles, until almost the very end, on short-sellers.

Who does this remind me of?

Jeff Matthews
I'm Not Making This Up

Jeff Matthews said...
This comment has been removed by a blog administrator.
bob obrien said...

I am amazed how Jeff manages to duck the facts presented - just ignores them, actually - and goes back to the party line. He apparently can't appreciate the difference between a naked short sale (illegal for all but MM's) and a legitimate short seller. Note that I am not against legitimate short selling, but rather against illegal manipulation.

Jeff manages to twist this into paranoia, which apparently in his lexicon means "that which Jeff doesn't agree with or that doesn't fit Jeff's propaganda agenda."

So Jeff continues to make things up.

One wonders how many successful dot com companies Jeff has created that he has such depth and insight into OSTK and what they should or shouldn't do. One wonders how Amazon burned $2 billion to get to the same level that OSTK has using $65 million, and yet OSTK is the work of incompetents and/or the devil.

One wonders whether Jeff is short OSTK or friends with folks who are, and is further somehow uniquely sympathetic to those who violate the law by systematically naked shorting as part of a manipulation tactic - the Reg SHO list says it's not all in my head - but that Jeff does in fact continue to make this up.

mfairview said...

Can't make this up, no kidding. Of the last 10 blogs by Jeff, 3 are bangers on OSTK (with more promised). No motives here, just telling the truth right Jeff? Methinks it's now "personal". For all the darts you're throwing at Bob for his stance against naked shorting, your overt tirade on Byrnes is equally curious.

Now it could be that you're truly trying to do the world a favor by exposing Dr. Byrnes nefarious plans of world domination... But, I suppose, and like Jim Cramer, it could also be that you only know Lapdog Herb and Rocker through chance encounters at the local Dunkin Donuts. I bet Herb favors the scones, right Jeff?

its_strange... I just can't figure you out man.. LOL

mfairview said...

BTW Jeff.. You really need to find a new line.. That "not a face card in the bunch" has been WELL used in your ramblings... Just trying to keep this blog fresh!

BelowTheCrowd said...

Now we're trashing Cramer too???

I guess nobody here had time to see him defending OSTK in a discussion with Herb Greenberg on his TV show last Thursday.

mfairview said...

I was, tongue in cheek, referring to Cramer calling into the OSTK cc and claiming to have only met David Rocker once at the vegetable section in the local market. Even though Rocker has invested millions in TSC... and, surprisingly, even though Rocker was interview by Cramer on his show :-/ Anyways, it's all very incestuous. I was just wondering if Jeff was part of the family? He may not be "making it up" per his mind, but he certainly ain't doing it for free.

bob obrien said...

How dare you accuse Jeff, who got his blog touted by the lapdog in one of his recent fish wrap exposes, of devoting the lion's share of his blog to 1) attacking OSTK, a known RP short; and 2) pretending that naked shorting doesn't exist, or isn't a problem.

Why, one might think that he was doing this as some sort of a blog-centric method of slamming Rocker shorts, from the way I read your statements. Do you really believe that just because a hedge fund manager like Jeff apparently knows Herb, and presumably Rocker, that he would stoop to attacking companies on their behalf?

That's ridiculous.

If Cramer wants to claim that he only met the largest individual shareholder in his company once in the A&P, presumably doing a little late night raid on the Good Humor section or whatnot, how dare you malign his recollection by introducing factual accounts of his having appeared on Cramer's show. How dare you.

And if you want to believe that Jeff has some sort of agenda that is not 110% focused on beaming his laser like powers of reasoning on objective, factual data, again, I say, how dare you.

How DARE you.

Jeff Matthews said...

Funny! First, "mfairview" says I'm on the take, then "bob o'brien" says I have an agenda involving Rocker, Cramer, and Greenberg.

Great stuff, guys--but we're still waiting for the first piece of actual factual data from the Overstock defenders that does not involve the evils of the Naked Short Selling Cabal and other paranoid fantasies that have no bearing--repeat, no bearing--on the movements in Overstock.com shares.

I have, in fact, never mentioned the merits or demerits of Overstock.com as a stock.

I could own the stock, for all anyone knows. Being subjective, questions of stock valuations are not the purview of this blog.

Rather, my focus has strictly been on statements by Overstock CEO Byrnes and his "Certifiables."

Like, for example, why Patrick Byrne makes factually incorrect claims regarding Overstock's business on his conference calls. Repeatedly.

Still waiting for some help from you cheerleaders on that one.

Jeff Matthews
I Am Not Making This Up.

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