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When stocks start to go bad, things sometimes happen in multiples. So it is with my favorite source of corporate entertainment, Overstock.com (NASDAQ:OSTK). On top of a simply horrid fourth quarter, the company's shares received yet more bad news in recent days: It is being dropped from the Nasdaq Internet Index.

The significance of this news, which received zero news media coverage, becomes obvious if you look at a list of the top institutional holders of the company.

Right at the top, beneath the clueless Canadians Francis Chou (Chou Associates) and Fairfax Financial Holdings, you will note that Vanguard Group is a 3.2% holder of the company's shares, with 753,587 shares.

Vanguard Group is, of course, one of the biggest indexers in creation. (Full disclosure: I own shares in some Vanguard index funds.) The Vanguard portion of the Overstock portfolio is, I think, the most vulnerable to selling pressure in the days and weeks ahead.

Vanguard is too smart to dump all its shares at one time, but is likely to shed its shares sooner rather than later, to the extent that they are in index portfolios.

Also high on the list are Dimensional Fund Advisors and State Street Corporation. These aren't indexers but, along with the other big institutions on the list, are likely to get rid of their shares if and when Overstock issues more stock to make ends meet.

The lower the stock price goes, the more stock has to be issued. This will result in the "death spiral" that Sam Antar pointed out in a blog post after the quarterly nightmare was released. Once the stock, now at a nine-year low, dips below $5, you can expect even the non-indexers to flee.

Meanwhile, other financial commentators have weighed in on the ongoing Overstock nightmare. TheStreet.com called CEO Patrick Byrne's performance at the quarterly conference call among the "five dumbest things on Wall Street this week."

"O.co was my bad call," said Byrne, about his miserable marketing campaign, who then spoke incoherently about another major marketing mistake he made last year.

TheStreet went on to point out that "Byrne refused to divulge his 'bad decision,' saying: 'We tried killing it and it turns out that it was better not to have killed it and just have let it keep going and not have an ROI, a good ROI than to kill it all together.' We understand the ugly earnings apology, but what on earth are you rambling about, Patrick?"

Good question. And what's remarkable is that nobody, myself included, picked up on that bit of incoherence. It was that bad of a conference call.

The Motley Fool also piled on, saying that Overstock "could benefit from an intervention by Dr. Phil."

Not quite. I think a trip to Lourdes would be more helpful.

Source: Overstock.com Dropped From Nasdaq Internet Index