The Case Against Overstock.com (OSTK)

The Stalwart submits:

Those looking for some short exposure in their portfolio should read some of Jeff Matthews' excellent blog as he has been on a one-man mission to expose what he sees as fraud and deception at Overstock.com (NASD: OSTK).

According to Mr. Matthews, the management team is totally dishonest, they put out misleading financial data, and the business stinks.  In Stalwartian fashion he backs up his case with a close reading of the reports and lots of hard data.

Yesterday SeekingAlpha.Initializer.LogAndRun(load_article_toolbar);

Comments

[Betty Blowt...:]

It is too bad that Jeff Matthews is a moron. If he was just slightly smarter he could have understood my reports on Overstock.

In the initial report, I described Byrne as like Bode Miller in his approach to managing Overstock. Bode Miller is as famous for winning as wiping out. All or nothing. I doubt many investors are looking to go long companies in which 50% of the expected outcomes are zero (nor 25% or 40%). Under a bullet point headed Mercurial management, I wrote:

However that approach assures a wider range of outcomes than some investors may be comfortable with—see Bode Miller’s route to the World Cup downhill skiing title.


It was an observation more likely to quicken the pulse and warm the hearts of short sellers.

Jeff Matthews, who writes a blog and claims to be a hedge fund manager, somehow obtained my report though he did not trade with that firm. In his blog, he observed that:

"The most bullish "consensus" analyst, as I can see, is Craig Bibb, who assumed coverage at WR Hambrecht in April, a few months after the previous analyst, Bill Lennan, cut his earnings and revenue numbers and took his price target from $85 to $60, helping spark a decline in the stock.

Bibb took over for Lennan with a buy rating and a decidedly cheery note in which he compared Overstock.com CEO Patrick Byrne to Olympic Ski Champion Bode Miller. I am not making that up.

Bibb further ingratiated himself with Overstock by writing that “Management is taking a dynamic approach to finding the efficient frontier of growth and profitability…,” precisely the kind of Wall Street lingo that makes sense only if you start your day sniffing glue."

He mis-read a derisive warning to investors and suggested that it was compliment. It is hard to believe that anyone charged with managing the money of others could be so stupid. I thought I successfuly thread a needle as I tried to simulatnaeously warn investors, keep my bosses and Byrne happy and still be truthful. No doubt Byrne, a maverick, viewed the comparison to Miller, a famous maverick, as a compliment. It wasn’t. For the record, Bode Miller is not an “Olympic Ski Champion.” He wrecked.

From Wikipedia:

Despite the hype surrounding Miller in the weeks prior to the 2006 Winter Olympics, every one of Miller's five medal bids in the Turin Games fell short: he finished a disappointing 5th in the Downhill, was disqualified – while in first place at the time – during the second leg of the Combined event, received a DNF (Did Not Finish) in the Super G, tied for 6th in the Giant Slalom, and claimed another DNF after missing a gate in the Slalom.

Miller did get two silver medals back in 2002.

The Matthews insult lives on, available to all on the internet while the report he misrepresented is only available to particularly diligent First Call subscribers interested enough to do an advanced search (No one, in other words). Since the insult has not gone away, I felt compelled to set the record straight even if no one cares but me (I concede that is likely the case).

To further straighten things out, when I wrote “Management is taking a dynamic approach to finding the efficient frontier of growth and profitability” I thought I had found a way to say “management is using trial and error since it does not yet know how to balance growth and profitability” without infuriating management. Perhaps if Mr. Matthews had started his day in his usual manner he would have gotten the point. I doubt many real clients needed anything other than their morning cup of Starbucks.

2008 Feb 04 12:14 PM

[Bill Gates:]

Jeff Matthews is dishonest. His basic mode of operation is to take comments out of context from analysts and management. Re-engineer the intent of the comment then mock the speaker. I've never read a single useful moneymaking idea on his blog.

2008 May 22 01:41 PM