Wednesday, October 10, 2007

Intellectual Gunslingers Running Amok…in Utah


Public shareholders of Overstock.com are in for a rude awakening. It seems their company was taken over by its very own President without so much as an SEC filing!

At least, that’s how I read the following introduction to a recent article in the Utah Statesman, the “official student newspaper” of Utah State University.

Jason Lindsey, creator and owner of Overstock.com and an innovator in the world of e-business, who graduated from USU in 1996 with bachelor's and master's degrees in business and accounting, revisited his alma mater to speak to a group of around 150 people about his business and the things he's learned from it.


Having once written for a student newspaper that I hesitate to name—not for reasons of confidentiality or bad feelings or anything like that, but because it was called, and I am not making this up, the “Brown & White” (worse, those were the team colors)—I sympathize with the article’s author for not getting the Overstock.com ownership structure straight.

As described here previously (“Blame it on the Ramones” from April 2005), complete and faithful accuracy is not necessarily a hallmark of student newspapers, no thanks to yours truly.

While the Utah Statesmen writer clearly does not grasp the significant difference between public and private ownership, my guess is the responsibility for the misunderstanding rests not with her but with the subject of the article, who perhaps did not make it clear that Overstock.com is in fact a public company owned by the shareholders.

Not by “founder and owner” Jason Lindsey’s own personal LLC.

But that’s beside the point. The point being the very first life-lesson Lindsey shared with the audience, which is, as described in the article, as follows:

"Choose integrity," Lindsey said of his first lesson. "It's what makes societies and relationships work.

Now, “choose integrity” is quite the noble sentiment.

However, Lindsey apparently never bothered to inform the good students at Utah State about the antics of his business partner, Overstock.com CEO Patrick Byrne.

Byrne, as long-time readers know, has publicly mused about the evil doings of, and I quote, “Israeli mobsters,” “crooked” reporters, SEC “lapdogs” and other “tools of Satan” that are all part of purported a short-selling conspiracy against his company.

I make none of those up, nor the following:

“The mastermind is a name your readers would recognize who’s been to prison before. He organizes bear raids on companies. He works through a group of four to five hedge funds….The hedge funds have half a dozen reporters on their payroll….The reporters are condoms used and discarded by them.”

“Integrity” is not quite the noun coming to mind just now.

But perhaps Mr. Lindsey doesn’t grasp much in the way of nuance, for his very next sentence reveals the thin intellectual curtain draped behind his “choose integrity” theme:

"The reason people aren't rushing to the Middle East and investing in the infrastructure of these countries we're in is because there's no rule of law. There's no way to know someone with a machine gun will come and take away what you build there. Or the government, for that matter."

In fact, not only are people rushing to the Middle East and investing in the infrastructure, but entire companies—Halliburton, for example—are moving there in order to participate in the very infrastructure boom Mr. Lindsey seems not to know exists.

Still, if he doesn’t know what’s going on in his own back yard, how’s he supposed to know what’s going on half way around the world?



Jeff Matthews
I Am Not Making This Up


© 2007 NotMakingThisUp, LLC

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews' recommendations. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.

9 comments:

cadamyale said...

Ah, Overstock. You could write about this circus everyday and it would never get old. Have you heard from the old Padawan Cowboy lately?

Sam E. Antar said...

Jeff:

Have you heard from the Sith Lord recently?

Respectfully,

Sam E. Antar (former CFO to the Darth Vader of Capitalism)

Jack Straw said...

Jeff - on other blogs I read, whenever the author even mentions a company (much less makes it the focal point of a post), he/she always includes a specific disclaimer at the bottom nothing whether or not he/she, family, or clients have a position in the stock. How come you don't do that?

I love your blog, and actually enjoy reading when you write about Overstock, and think the whole Patrick Byrne saga is amusing at best and scary at its worst. It's just a little difficult to take what you write without a grain of salt though if you never say whether or not you have a position. The internet is filled with people who write blogs and want to influence a stock. Anyone could debate if they are able to in fact do that. Half the time these people are probably quacks anyway, just doing this on their own. But I just think that you shouldn't be immune to disclosing a position in a stock you talk about just because you have a respectable business with respectable clients, a respectable reputation, etc.

Jack Straw said...

And, yes, I realize you do have the GENERAL disclaimer. But that seems sort of meaningless these days. Everyone discloses anything and everything.

Jeff Matthews said...

Jack Straw:

Yes, "other blogs" you read do often carry "the author is long/the author is short" type disclaimers.

But that's because those "other blogs" focus on why the author is buying or selling or likes or hates a certain stock.

However, we here at NMTU never discuss an individual stock, its share price or its valuation--let alone whether readers ought to buy or sell a particular stock.

We frequently discuss companies, but not the merits of those stocks.

The one single exception was during an early debate the stock market was having on Google, when I took the side that investors who were focused on Google's $300+ share price as a sign of "overvaluation," rather than focusing on the business' return on capital and relative growth rates, were missing the point.

I made it fairly clear then that I had more than a rooting interest in Google as a stock, but also made it very very very clear I was making no recommendation to buy or sell Google shares.

Valuation of any piece of stock market paper is, as always, in the eye of the beholder, and we are not in the business of recommending stocks.

Consequently, I do not in this space venture outside our "don't ask, don't tell" policy when it comes to the merits of a particular stock's valuation.

For example, there was not a comma in this post that discussed Overstock.com as a stock, nor have I ever discussed the merits of Overstock.com as a potential investment in this space.

Hence, I think, the disclosure you see is full and fair.

But thanks for allowing me to clarify it.

Jack Straw said...

Jeff - thanks for the response. I understand your position. I guess my only point was that anyone with a 3rd grade reading level would understand that you are, ahem, "negative" on Overstock's management team. Now, for all I know, you could be long the stock. Although something tells me after reading your blog for years that your common sense approach does not allow you to have ownership in a company where you dont trust the management team on some level. I think some posts of yours have even talked about how important it is. Anyway, thanks for the clarification and keep up the great work. I've been plugging this blog for years.

Jeff Matthews said...

Thanks, Jack, much appreciated.

Gatsu99k said...

Just saying hello to a fellow Alumni of a certain school with the god awful sports team colors.

However, you have to admit, the police blotter was particular entertaining during a certain week in September.

As for Overstock - can't they just enron and get it over with, the circus is tiresome.


-M

BelowTheCrowd said...

With regards to OSTK, also worth mentioning that there has been some chatter about the SEC finally clamping down and eliminating the loopholes in reg SHO, forcing brokers to close their fails. OSTK really took off in the past couple of weeks, in part, one would think, due to the need to close out those nasty naked shorts.

The rule went into effect Monday. With all those naked shorts now closed and the stock no longer benefitting from artificial selling, it's down 20% or so from the Thursday peak.

And Patrick Byrne no longer has the evil naked shorts to blame for his stock price decline.

-btc