Good-bye, Big O (OSTK)
Well, after waiting what was inarguably much too long for this company to straighten itself out, I've finally sold off my remaining shares in Overstock.com (OSTK -- click to register for free RT streaming quote).
I've been an Overstock shareholder for about a year now, and paid a lot more for these shares (average purchase price of about $53) than I'm receiving for them today (sold at $22.90).
Owning OSTK over the past year has been a slow but entertaining way to go broke. I wrote last week that I was very concerned about the potential loss of the company's well-respected Chairman Jack Byrne, and while I could wait around for their Spring meeting and see if he actually decides to leave I think it's probably just as good to sell now and put this money into an investment that I can be much happier with for the long haul.
It seems as though anyone who has been at all involved in the stock market, read the Wall Street Journal, watched CNBC, or even poked around on the investment websites during the past year has a strong opinion about Overstock and it's mercurial CEO, Patrick Byrne.
I wrote a little while ago about the "Three Horesemen" -- the three worst companies in my portfolio. Overstock was one of them, and the one I thought I was closest to selling at the time (I actually shaved off some of my Shanda holdings first). So it's not surprise, I suppose, that I'm now clearing the decks of the last dregs of my hope for Overstock and letting it wash into the sea of failed investment ideas, never to be heard from again.
Overstock was actually a very solid business idea, in my opinion -- it makes sense to standardize and apply economies of scale to closeout retailing. And I've been quite happy with them as a customer, not least because of the essentially free shipping for large heavy things (not really free, since I clearly paid for that shipping as an investor). All other things being equal, even considering the management problems they had in the second half of last year in getting t heir new IT systems online and working, I'd be willing to sit it out and see if the good business plan and some attentive management, led by a very active CEO with a huge personal stake and a Chairman with a sterling reputation, could bring Overstock over the hump and make it into a profitable company.
But the sideshow has taken over. Patrick Byrne's lawsuit against those he believes have profited from illegally selling short OSTK shares (naked shorting) and fraudulently conspired with media figures to bring prices down is clearly distracting him from running the company. I thought when he handed off the suit to the lawyers last year that he might be finally be ready to let it go and refocus on building Overstock's business ... but clearly that's not the case. Even dad Jack is frustrated with him, and frustrated enough to air that publicly and threaten to step down as Chairman of the Board.
And perhaps most telling, Patrick has been freely telling journalists that he was hoping to have left this job this year ... another indicator that his heart really isn't in the hard work of growing an online retailer that is facing strong competition from Amazon, Ebay and others.
It might be that both Patrick and Jack will leave -- it sounds like Patrick is sick of this business and his dad is sick of Patrick's inattention to the business. It's possible that they could leave and bring in a seasoned manager to focus on operations to turn their very solid sales growth into some actual potential for profitability and earnings growth.
But I'm not willing to wait around for that potential outcome -- and with a majority of shares in the hand of the Byrne family and their friends, I think it's just as likely that they'll sell out to someone or take it private, and at this point I don't think anyone's going to pay much of a premium for closeout goods.
I've been an Overstock shareholder for about a year now, and paid a lot more for these shares (average purchase price of about $53) than I'm receiving for them today (sold at $22.90).
Owning OSTK over the past year has been a slow but entertaining way to go broke. I wrote last week that I was very concerned about the potential loss of the company's well-respected Chairman Jack Byrne, and while I could wait around for their Spring meeting and see if he actually decides to leave I think it's probably just as good to sell now and put this money into an investment that I can be much happier with for the long haul.
It seems as though anyone who has been at all involved in the stock market, read the Wall Street Journal, watched CNBC, or even poked around on the investment websites during the past year has a strong opinion about Overstock and it's mercurial CEO, Patrick Byrne.
I wrote a little while ago about the "Three Horesemen" -- the three worst companies in my portfolio. Overstock was one of them, and the one I thought I was closest to selling at the time (I actually shaved off some of my Shanda holdings first). So it's not surprise, I suppose, that I'm now clearing the decks of the last dregs of my hope for Overstock and letting it wash into the sea of failed investment ideas, never to be heard from again.
Overstock was actually a very solid business idea, in my opinion -- it makes sense to standardize and apply economies of scale to closeout retailing. And I've been quite happy with them as a customer, not least because of the essentially free shipping for large heavy things (not really free, since I clearly paid for that shipping as an investor). All other things being equal, even considering the management problems they had in the second half of last year in getting t heir new IT systems online and working, I'd be willing to sit it out and see if the good business plan and some attentive management, led by a very active CEO with a huge personal stake and a Chairman with a sterling reputation, could bring Overstock over the hump and make it into a profitable company.
But the sideshow has taken over. Patrick Byrne's lawsuit against those he believes have profited from illegally selling short OSTK shares (naked shorting) and fraudulently conspired with media figures to bring prices down is clearly distracting him from running the company. I thought when he handed off the suit to the lawyers last year that he might be finally be ready to let it go and refocus on building Overstock's business ... but clearly that's not the case. Even dad Jack is frustrated with him, and frustrated enough to air that publicly and threaten to step down as Chairman of the Board.
And perhaps most telling, Patrick has been freely telling journalists that he was hoping to have left this job this year ... another indicator that his heart really isn't in the hard work of growing an online retailer that is facing strong competition from Amazon, Ebay and others.
It might be that both Patrick and Jack will leave -- it sounds like Patrick is sick of this business and his dad is sick of Patrick's inattention to the business. It's possible that they could leave and bring in a seasoned manager to focus on operations to turn their very solid sales growth into some actual potential for profitability and earnings growth.
But I'm not willing to wait around for that potential outcome -- and with a majority of shares in the hand of the Byrne family and their friends, I think it's just as likely that they'll sell out to someone or take it private, and at this point I don't think anyone's going to pay much of a premium for closeout goods.
This article posted by One Guy @ 3/10/2006 04:00:00 PM 0 comments
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