Thursday, October 18, 2007

NovaStar Lists on Kazakhstan? “No Short-Sale for YOU!”



A couple years ago a despicable individual made his presence felt on this blog by posting numerous comments, all centered around his theory of a so-called “naked short-selling” crisis for the stock market in general, and shares of Overstock.com in particular.

This individual was so despicable he could not even post under his real name.

He instead used a pseudonym (‘Bob O’Brien’), thus giving him license to write pretty much whatever deluded thoughts crossed his brain, without regard to truth, or even half-truth, or even three-quarters truth.

With no such facts to get in the way of his wildly imaginative paranoia, this individual posted his demented ravings in the same way old Bostonians voted for their famously corrupt Mayor James Michael Curley—“often and early.”

The following is a sample raving that appeared in response to a fact we at NotMakingThisUp made public.

The fact we made public was this: while ‘Bob O’Brien’ had recently appeared on the quarterly earnings call of Overstock.com pretending to be just a random questioner offering up some thoughts about the supposed “naked short-selling” conspiracy against the company while the CEO, Patrick Byrne, listened attentively and prodded the supposedly random caller to expound at length, he and Byrne had in fact been in contact well before the earnings call took place.

I make none of his remarkable response up:

You don't know if the video shadow was me or the camera man or a 45 year old Vietnamese woman or the cab driver. You don't know how much my voice was altered on the call or the video, or even if it was "mine." You don't even know if there's one or three or twenty people who collectively are "Bob".

In short, you know nothing.


Now, this creep did not limit his comments on this blog and elsewhere to Overstock.com.

His other obsession was NovaStar Financial, a company that, like Overstock.com, was heavily shorted and for some bizarre reason attracted a rabid shareholder base comprising conspiracy-theorists of the “Area 51” stripe—which is to say, lunatics.

Now, I do not know whether he still owns his shares of NovaStar, which has declined from $140 per share (split-adjusted) at the time he was making threats across the internet against individuals who disagreed with his entirely faulty assessment of both NovaStar and Overstock.com, to its current $7.38 per share.

But if he does, I almost feel sorry for the management of NovaStar—who made a good business out of pushing sub-prime mortgages on poor shlubs ill-prepared to afford them; reselling those mortgages into the derivatives market; booking non-cash gains on the sale of those mortgages and paying fat cash dividends to their shareholders—for he could be making their lives as miserable as he made many innocent bystanders throughout his “naked short-selling” crusade.

But in reality the folks at NovaStar probably get what they deserve, which includes today’s news that the company has been advised by the staff of the NYSE that NovaStar common and preferred stocks “no longer meet applicable standards for continued listing on the New York Stock Exchange…”

Thus the company said it “will explore alternative arrangements for the listing or quoting of its common and preferred stock.”

After glancing at the company's financials, which show NovaStar’s equity dropping while its debt was rising from $1.6 billion to $4.3 billion since Bob O’Brien’s glory days peaked during that Overstock.com conference call, I am scratching my head at which stock exchange might want to handle this one.

Kazakhstan, perhaps?

Upon reflection, that might be just the place for such an ill-starred enterprise.

I can imagine some short-seller looking to borrow NovaStar stock to sell it short on the Kazakhstan Exchange being told, “No short-sale for YOU!”



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.

3 comments:

Worrisome Growth said...

Thank you so much for your prescient recommendation of Overstock at the beginning of the year. The 100% gain in the stock is an enormous bonus as it is now to time to write tuition checks. Our family owes you so much.

Great call!

Jeff Matthews said...

"Worrisome Growth" must have gotten too close to those UFO's out there in Area 51.

We never ever recommend stocks here. Period.

russell120 said...

I followed Novastar (NFI) for a while. Thank you for filling in some of the details.

I believe some of the fanaticism came from a group of retirees who bought it as a high yield investment and then got really really nervous when its pps began to slide.

Of course as pps slid, the "yield" kept going up and up: at least for a while.