"I once was long but now I am short...."
Upon my initial peruse of this stock, I was gleefully long and armed with the common arguments circulating the long investing community. I was impressed by the forward thinking ideas of Patrick Byrne and his pursuit of implementing blockchain technology as a part of Overstock's strategic plan. I found it incredible that such a staunch opponent, Marc Cohodes, joined the team on the long side. I believed Overstock was going to revolutionize the world with the ICO of TZero and the implementation of an immediately settled securities platform. I thought about the possibility of a buyout of part or all of the company. The short float was ripe for a squeeze too! All these made me very interested in the trade opportunity of this security. Although from a valuation standpoint when i started buying OSTK in the 30's I believed that I was paying a premium for a speculative play, I considered the momentum possible if the company is successful in delivering even a part of the touted claims. It amazes me, and I am confident that I am not alone, how much momentum has carried the price of OSTK despite the company failing to deliver even a decent fraction of what it claimed.
- The ICO has failed. It was supposed to raise $500 million and launch on November 15th, 2017. It was delayed until December 18, 2017 and as of this writing according to available sources they have accomplished approximately $100 million in capital raised. The money was raised for TZero not for Overstock. Overstock owns a position in TZero.
- The Quantum Fund deal for $100 million was very expensive to the company and shareholders alike increasing the float by more than 2.4 million shares and subsequently diluting the value of future earnings by a significant amount.
- The company partnered with Muriel Siebert for their "revolutionary" and "disruptive" brokerage operation. This should speak for itself.
- The company continues to make lofty claims which have yet to be even remotely justified increasing the likelihood of attention by regulators. A great read on this is the article written by Forensic Accountant Sam Antar "Marc Cohodes Buys Stock And Vanishes From Overstock CEO's Smear Site"
- All of the recent press releases have been disappointing in terms of articulating a viable economic advantage gained by Overstock given the amount of capital being consumed in these "ideas" by Byrne.
- The chances of a buyout at the current share price is hard to even imagine.
For all these reasons I sold my shares and watched the parabolic price rise in utter amazement. I couldn't help but bite on what could very well be one of the greatest shorts of a lifetime. Perhaps I am wrong and this will turnout to be the next Goldman Sacs meets Amazon super company, but despite the market's recent run up it is my conviction that when the institutions digest the reality of this mirage of ideas they will be selling into the hype supported by the retail trader/investor's folly. When the dust settles it will be more like "Overpriced" instead of Overstock. I hope this finds you all well and happy trading.
Disclosure: I am/we are short OSTK.