Saturday, January 28, 2006

Cash Byrne: Latest 8-K from

Overstock (OSTK), an online closeout retailer, is going nowhere fast.

The company will achieve neither the expected level of top-line growth nor profitability CEO Patrick Byrne, in a series of bizarre press releases and conference calls, keeps on promising the Street.

Q4 sales were disappointing, they're likely to struggle with excess inventory, and soon enough, Overstock will have to raise more cash.

With negative cash flow and abysmal operational problems, OSTK's clearly in the gutter.

Overstock is hemorrhaging money and we certainly find it disconcerting that they couldn't squeeze a profit during the holidays. In 2005, Overstock burned through well over $100 million dollars.

So what does management at Overstock do to top off a horrendous year in which shares dived from $70 to $24?

Apparently, reward itself. In Overstock's bizarr-O world, killing your stock must be a good thing, because execs all got bonuses.

After Friday's close, Overstock filed this 8-K:
On January 23, 2006 the Compensation Committee of the Board of Directors of, Inc. (the "Company") approved bonus payments to executive officers of the Company, including the named executive officers.

Stephen Tryon, Senior Vice President $ 250,000

Jonathan E. Johnson III, Senior Vice President, Corporate Affairs
and Legal $ 250,000

David Chidester, Senior Vice President, Finance $ 250,000

Russell (Tad) Martin, Senior Vice President of Merchandising and
Operations $ 250,000

Kamille Twomey, Senior Vice President, Marketing $ 250,000

Stormy Simon, Senior Vice President, BMV and Off-Line Advertising $ 250,000

The important item to take away from all of this is that execs were paid in cash, not stock -- this tells us exactly where insiders think their stock is headed.

Moreover, this wouldn't be the first time CEO Patrick Byrne released negative/market-moving news when the market was either closed or on vacation.

We are reiterating our underweight/sell rating on Overstock.

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