Step back, Jack (OSTK)
Well, this is disappointing news on first read. I just saw that Overstock Chairman of the Board Jack Byrne is thinking of stepping down.
Normally, you might not think that's a bad idea if there is conflict in the executive suite ... when the CEO and Chairman are at loggerheads, it can be good for business if one of them bows out.
But Jack Byrne is the father of CEO Patrick Byrne, and I'm afraid Jack's presence as chairman was one of the things that was giving me some confidence that Overstock would be able to refocus on their core business and turn things around.
Apparently, the late session traders at least are not of the same mind as I am -- they've bid up OSTK shares by several percent since this story broke. I'm not sure I understand why, unless they think that Jack's public warning that he might step down gives Patrick the kick in the pants that gets him to refocus his energy on the business.
I wrote a couple weeks ago that of the three worst offenders in my portfolio, Overstock was the one I was closest to selling (in the interim, I sold about a third of my Shanda holdings, too). And I wrote that one of the things keeping me in the fold was that I thought Jack would bring the Warren Buffett "focus on the business fundamentals" influence back to Overstock. Perhaps that's too much to ask of a family member and of someone who was already a major owner and board member, but that's what I was hoping -- and it seemed that kind of influence was what Patrick wanted when he bround dad into the chairmanship.
But it's clear after reading his comments that Jack is frustrated with his son and would rather keep a son than keep a job. I can't blame him for that, but I think if he leaves as Chairman it's likely to be bad for Overstock's future. He wouldn't leave entirely, of course, since he still owns close to 10 percent of the company (Overstock is predominantly owned by Patrick's family and friends, which is probably part of why he's so extra mad about the shortsellers selling shares they couldn't possibly get their hands on).
I think the prevailing opinion on Wall Street is that Patrick Byrne, whether you like him or not -- and from what I know, I do like him -- is at best turning into a tragic hero, Don Quixote tilting at windmills. I happen to believe that his case also has some merit and that it's probably good for all of us if the short-selling system, the financial press and the hedge funds get additional scrutiny. But I also think that this crusade may benefit the markets but be terrible for Overstock, which seems to have lost the full-time attention of it's CEO at a very vulnerable point in it's development as a company.
There are still plenty of arguments in favor of Overstock if you think they can right the ship -- it's a compelling business model, and they have very solid sales growth and might even be thought of as a value investment in some ways today (at least according to Geoff Gannon, a value investing blogger).
But if Jack Byrne's shot across the bow doesn't work and he decides to step down, that will be one more reason ... and maybe finally a good enough reason ... for me to sell.
Normally, you might not think that's a bad idea if there is conflict in the executive suite ... when the CEO and Chairman are at loggerheads, it can be good for business if one of them bows out.
But Jack Byrne is the father of CEO Patrick Byrne, and I'm afraid Jack's presence as chairman was one of the things that was giving me some confidence that Overstock would be able to refocus on their core business and turn things around.
Apparently, the late session traders at least are not of the same mind as I am -- they've bid up OSTK shares by several percent since this story broke. I'm not sure I understand why, unless they think that Jack's public warning that he might step down gives Patrick the kick in the pants that gets him to refocus his energy on the business.
I wrote a couple weeks ago that of the three worst offenders in my portfolio, Overstock was the one I was closest to selling (in the interim, I sold about a third of my Shanda holdings, too). And I wrote that one of the things keeping me in the fold was that I thought Jack would bring the Warren Buffett "focus on the business fundamentals" influence back to Overstock. Perhaps that's too much to ask of a family member and of someone who was already a major owner and board member, but that's what I was hoping -- and it seemed that kind of influence was what Patrick wanted when he bround dad into the chairmanship.
But it's clear after reading his comments that Jack is frustrated with his son and would rather keep a son than keep a job. I can't blame him for that, but I think if he leaves as Chairman it's likely to be bad for Overstock's future. He wouldn't leave entirely, of course, since he still owns close to 10 percent of the company (Overstock is predominantly owned by Patrick's family and friends, which is probably part of why he's so extra mad about the shortsellers selling shares they couldn't possibly get their hands on).
I think the prevailing opinion on Wall Street is that Patrick Byrne, whether you like him or not -- and from what I know, I do like him -- is at best turning into a tragic hero, Don Quixote tilting at windmills. I happen to believe that his case also has some merit and that it's probably good for all of us if the short-selling system, the financial press and the hedge funds get additional scrutiny. But I also think that this crusade may benefit the markets but be terrible for Overstock, which seems to have lost the full-time attention of it's CEO at a very vulnerable point in it's development as a company.
There are still plenty of arguments in favor of Overstock if you think they can right the ship -- it's a compelling business model, and they have very solid sales growth and might even be thought of as a value investment in some ways today (at least according to Geoff Gannon, a value investing blogger).
But if Jack Byrne's shot across the bow doesn't work and he decides to step down, that will be one more reason ... and maybe finally a good enough reason ... for me to sell.
Labels: OSTK
This article posted by One Guy @ 3/02/2006 08:04:00 PM 0 comments
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