Monday, October 31, 2005

The Jester's Plaint: Aghast at OSTK CEO Patrick Byrne is hands down the most eccentric, oddball persona on Wall Street.

Caught in a catatonic state of corporate paranoia, CEO Pat Byrne has repeatedly claimed that there is a "conspiracy" against him and his company, an online liquidator that is mired in operational woes.

Overstock recently filed an amended complaint in California State Superior Court charging Rocker (a well known shortseller) along with the Arizona research firm Gradient Analytics, claiming that Rocker was behind "a wide-scale predatory campaign of knowingly distributing false, and overtly biased, written reports about Overstock (OSTK) to disparage Overstock and enrich themselves."

On an acrimonious 8/11 conference call, Byrne powerpointed a network of more than two dozen fund managers, journalists, law firms and regulatory agencies he claimed were conspiring to drive Overstock's shares to the ground.

Here's the well known kicker: Byrne claimed in the same conference call that Rocker and other alleged conspirators were taking directions from a mastermind that Byrne called a "Sith Lord," a reference to a villain in the "Star Wars" movies.

The Sith Lord?

It gets better.

A recent note to shareholders had Byrne coughing up even more humorous nonsense:
"Gomen nasai. Q3 was rough. My bad. I bit off more technology projects than my colleagues could chew. The last bite, an ERP implementation, was one bite too many, and we choked on it. "
When asked how hires its execs, Byrne's response was:
"When we meet someone with real brains and energy and the right character, we hire them even without giving them a job." Byrne describes one executive who was hired after taking a year off to ski. “She was basically a ski bum,” he said. She was also a Phi Beta Kappa from Dartmouth and had worked at Goldman Sachs. I hired her with no job and said, ‘Drift around for a couple of months and figure out what you’re going to do.’” The woman went on to become VP of Marketing."
In other words: If CNBC announces another live interview with Byrne, you'll want to make sure the TIVO is on.

On a more serious note, managerial eccentricity and oddball behavior should raise red flags, or yellow ones at the very least.

Pat Byrne seems to be very good at scapegoating externalities and dressing his company's ($650 million dollar market value) shortcomings in convoluted tropes and pop culture innuendo.

Share are suffering; a quick glance at OSTK's daily chart this morning revealed a major downtrend.

The fundamentals underlying the chart are just as horrific: So far this year, Overstock has burned through at least $80 million by our count.

That leaves Overstock with $77 million in cash and marketable securities, versus $290 million at the beginning of the year.

Even more, inventories have more than doubled to $90 million, and shopper acquisition costs continue to rise.

We're forecasting further erosion in's shares until further notice.

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