Alma Templeton

Bidz.com Stock Buybacks: A Wise Move?

Of course, Antar fails to mention the key facts

1. Both Zinbergs were under pre-designed agreements to sell at a certain time regardless of the price, so the price at the point at which they sold should not be a representation of their thoughts on whether it was undervalued given that they were legally compelled to sell.

2. Kong's actual transaction was a net exercise of options soon to expire in which he obtained shares by surrendering the amount applicable to cover the option price and payroll taxes to the company, and consequently increased his actual position. The full filing states that he acquired 75,000 and disposed of 53,801. It breaks the transaction down by stating: "Represents a net exercise of stock options expiring on December 5, 2008. The value of 53,801 shares surrendered back to the Company and retired, equals the amount necessary to pay the exercise price and payroll taxes." Kong had to do something with the options before the upcoming expiration, but Antar doesn’t mention this.

This is quite typical of Antar. He is more than capable of reading the filing properly and representing it properly. However, he intentionally fails to do so because it would not be in line with how those who pull his strings want the facts to be distorted. Antar would seem to be nothing more than a paid shill and can be lumped in with other undesirable elements like Gary Weiss and Floyd Schneider. In fact, certain allegations have been made that he is employed through Magic Consulting (run by ex-con Michelle Sarian), a group that takes consulting contracts on from Third Point, a firm currently under investigation by the SEC.

Sam likes to pass himself off as a reformed criminal, but he's simply a flim flam scammer moved on to another long con. I hope that Magic Consulting covers his legal fees.

Criminal Past Haunts Bidz.com - Barron's

That should read editorial. I don't have a staff like Rachel to check my posts for mistakes, so she should know better than to confuse past and present tense.

On Bidz.com's Questionable and Inconsistent Inventory Disclosures

Sam still hasn't answered my questions from March debunking his reading of GAAP. This article is also predicated upon that erroneous reading.

He also hasn't responded to queries about why he gave Barry Minkow 300k to commission a report on USANA, a company that many of the same people attacking Bidz were shorting at the same time.

Sam hasn't even practiced accounting since the 80's, when he ripped people off using primitive techniques. Back when he was doing accounting, people made journal entries on paper and balanced the books using a calculator. Sam investigating fraud is like a mainframe programmer giving someone Java advice, or a lawyer from the 1700's trying to draft a document about internet piracy.

Quite honestly, I'm surprised that the people who seek to attack Bidz.com didn't bother to come up with the dollars to pay off a more credible "expert." Sam is, to put it simply, a dinosaur. He's a has been who has been exposed ages ago attempting to get over on the reader with one last fraud.

I hope that Magic Consulting also covers his legal fees.

Criminal Past Haunts Bidz.com - Barron's

Eli,

The article states: "Zinberg himself doesn't have a criminal record, but several of his partners and key staff do" yet the article does not name any current key staff or partners with records. You may see it as a small point, but wouldn't inserting the word former add more accuracy to the summary? Do you think this was simply an editorially mistake? If so, will you rectify it?

Criminal Past Haunts Bidz.com - Barron's

1. Well, I certainly wouldn't believe Rachel since she doesn't know the difference between past and present tense, and didn't properly understand the simple article.

2. Nor would I believe you since you don't even know what day it is.

3. Nor would I believe Barron's since they seemingly have connections to criminals and hedge fund gurus and would seem take their editorial positions accordingly.

As a Bidz shareholder, I am not going to tell anyone whether they should sell, buy, go long, or go short. That's up to the individual, their budget, and their gut feeling. However, what I can say is that the accusations seem overblown and unrelated to the actual nature of the business, and furthermore that the motivations of Barron's seem deceitful. Take from that what you will.

Criminal Past Haunts Bidz.com - Barron's

Do you actually think there is anyone out there who hasn't read that tripe? I'm pretty sure the company even mentioned it on Friday's conference call.

The argument that they were supposedly right about other companies and thus must be right about this company is a logical fallacy. If you put a blind fold on someone and have them throw thousands of darts, you can assume that one or two will hit a dartboard. However, using the fact that they threw one or two successful throws would not be a logical way to argue that all of their throws would be successful.

Criminal Past Haunts Bidz.com - Barron's

I have, in the past, disclosed that I am long Bidz. I have also disclosed that I purchase their jewelry from time to time. I've done a great deal of due dilligence on the company, and had already read about the stuff in the Barron's article a full 5 months ago when the bulk of it was published on someone's blogspot site. It didn't phase me then, so at this point, it just seems like rehash.

However, my reasons behind posting have very little to do with that. I hold stock in plenty of companies, but never have I seen one so mercilessly attacked on erroneous grounds. Despite the fact that I occassionally tease Patrick Byrne, I'm a pretty big fan of deepcapture.com, and I keep on seeing more and more parallels between the fragmeneted conspiracy that he is trying to expose and the principles involved in slandering Bidz. I feel that the matter is not being properly addressed by the media, and consequently, I feel that it is my duty as someone who is conscientious to speak out. I don't have a site or a magazine, so I can only hope that my comments do some small good in clearing things up for people who aren't sure what to think.

Criminal Past Haunts Bidz.com - Barron's

I would suggest that you consider reading the article again. You seem to have confused some of the key points, and additionally would appear to lack the ability to discern the difference between past and present tense.

1. You state that "several of [Zinberg's] partners and key staff do [have a criminal record]". Yet, nowhere in the article is a single present employee of Bidz.com named who has a criminal record. In fact, the most recent employment of anyone with a criminal record named in the article is 2003, a good 4 years before the company went public. By directly stating that current employees of the company have criminal records, you are slandering the company.

2. You state "VP Leon Kuperman insists there is nobody in the company today with a criminal record. But Kuperman also admits that the company only started investigating allegations recently after its board received an anonymous letter." However, given that all actual criminal convictions and charges are attributed to either former employees or people who were never employed by the company, one must wonder why you would expect them to have investigated in the first place. Should all public companies ask every employee for a list of co-workers at every place that they worked previously and run background checks on them too to make sure that the person never made the mistake of having social contact with someone who is less than stellar? To paraphrase Kuperman, how precisely does the fact that people who were never employed by the company in the first place warrant any change in their operational policies and procedures?

3. You state that Itkin managed an illegal strip club. In reality, Itkin's role is left unknown by the article, and the general impression that I got was that he served as a financial advisor. Furthermore, the strip club itself wasn't illegal. The liquor license issue would seem to be a zoning problem brought on by an overzealous dancer or two who didn't follow the rules. So, really, the only thing that you can tie to a present associate of Bidz is that they served as an advisor to a club nearly a decade ago where some girl stepped over the line and flashed her breasts or something. That's pretty weak.

4. I know that you're trying to get some buzz by parroting a juicy story, but you ought to be more accurate. Furthermore, I think the more juicy story is that Barron's has allegedly used Andrew Left (allegedly convicted of stock fraud), Sam Antar (convicted of the biggest IPO scam ever in the 80's) and Amr Elgindy (currently serving time for many charges, including stock fraud and selling non-existent stock) as sources.

5. Furthermore, what about the fact that former Barrons senior editor Cherly Einhorn allegedly published articles that supported the short positions of her husband hedge fund manager David Einhorn and his alleged friend Daniel Loeb? Do you think that a writer and an institution can be unbiased when they have social and financial ties to the people taking short positions?

6. If Barrons is to stand as the journal of record for dictating morality, shouldn't they be subject to scrutiny? If they are or did publish articles with the specific intent of creating collusion with short sellers in order to support their position, don't they lose their moral ground? Wouldn't one then have to doubt both the accuracy of their facts and their motivations? Given their supposedly large influence over the market, this would seem like a bigger story, and I can only wonder if less influential bloggers are too fearful to cover it.

Bidz.com: Inventory and Cash Flow Concerns

If the stock goes down, shorts make money. This article was written by a short. It was a faulty analysis designed to manipulate. I would love for someone to bring out the truth, but third rate analysis is not it. Stewart, the head fund honcho, is just throwing alot of garbage out there hoping that it sticks, so that he can cover his position.

Bidz.com: Inventory and Cash Flow Concerns

"Disclosure: Author has a short position in BIDZ"

I think this really says it all. The fact that he's entirely full of it and can't even come up with a cogent argument to support his short position is just gravy.

Bidz.com: Inventory and Cash Flow Concerns

“Is the company involved in technology or another volatile or rapidly changing industry? Yes
Consumer tastes and preferences for jewelry products can change rapidly, thereby exposing us to significant inventory risks.”

That’s a standard disclosure that any consumer company has to make some form of. In reality, the jewelry business is more constant than most. That statement was meant to refer to tech businesses and things along those lines. Anyone can take anything and twist the words. A good person does it well. Stewart, the VP of Operations at Builder’s Fixed Income Fund, is not good at this. His assertions do not even remotely stand up under the light of day. He is nothing but a huckster and a charlatan attempting to make a quick buck by bending the truth to the point of outright lies.

Bidz.com: Inventory and Cash Flow Concerns

“Is the company a manufacturer, or does it have a complex system to determine the value of inventory?”

This one is just dumb. Hedge fund honcho Stewart claims that the LA Times, quoting Citron, trashing their appraisals means that their inventory valuations are wrong. I could dispute the erroneous allegations about their inventory appraisals, but that’s for another time and another day. In reality, their inventory valuations have nothing to do with the appraisals. The inventory is valued at lower of FIFO cost or market. So, this has nothing to do with the appraisals as they are based on the actual worth of the item, not the lower of cost or market.

Bidz.com: Inventory and Cash Flow Concerns

• "After the close of an accounting period, have material reversing entries been made to the inventory account? Yes
In 2007, Bidz.com’s inventory reserve increased 133.2% over the previous year’s balance."


This is a daft attempt by known shorter Stewart if I’ve ever seen anyone. This was not the result of a reversing entry. They have more inventory now. Consequently, by applying the same logic to a higher quantity of inventory, they have a larger reserve. To claim that this involves a reversing entry, is both erroneous and slanderous. If Steward has to use a lie as bald faced as this, it’s clear that he doesn’t have much for ammunition.

Bidz.com: Inventory and Cash Flow Concerns

Has inventory turnover slowed over time?

As Bidz have grown, they have become more able to purchase inventory. As a result of this, they have opted to purchase more. They are clearly able to sell whatever they purchase. Bidz is probably more easily compares to say Zales than Blue Nile as Blue Nile takes a lot of inventory on consignment. Zales turnover averages around 2.5 or 2.6, a number that Bidz has always been above. Additionally, they had cash of roughly 60 million, debt of roughly 165 million and negative cash of around 125-130 mil.. Maybe we should start to short Zales as they’re clearly fraud using the authors ridiculous criteria.

Bidz.com: Inventory and Cash Flow Concerns

“Has the ratio of cost of sales to total sales decreased over time? “

This is an odd one to use to claim fraud given that it’s also the hallmark of a successful business and the goal of any business. This is effectively trying to use the growth and success of their business as innuendo. It’s completely ridiculous.