Warning: This Could Be Your CEO!

If you are, or plan to be, a shareholder of Overstock.com, make sure you read the Overstock.com message board at the following URL: http://forums.auctions.overstock.com/

You will find a message board titled “Deep Thoughts” by Overstock CEO Patrick Byrne, who posts his “Deep Thoughts” under the name Hannibal. You should read his posts.

You will find thoughts both deep and shallow, facts in the form of definitions of certain issues dear to his heart (including short-selling)…and you will also find weird tangential points, borderline-paranoid musings, and outright inanities.

For example, this from CEO Patrick Byrne:

The key is this: if given the right to create an unlimited number of new shares essentially out of thin air, not limited by the number of shares “in the borrow” as legal shorting requires, these hedge funds can always drive the price down and always cover for a profit. To which, I would say, “Well, yeah, sure, Patrick…but nobody is given that right to create unlimited shares out of thin air, least of all hedge funds. And even if they could, no hedge fund could always drive the price down and always cover for a profit–unless the fundamentals of the company justify that price action. Otherwise, Patrick, willing buyers–who vastly outnumber the ranks of shortsellers, as your own conference calls attest–would step in and buy.”

Now, before readers accuse me of exaggeration for effect, or simply of making it up–not allowed on this site–let me highlight a couple more facets of the Byrne “precis” on naked shorting (which clearly does exist, although not on the scale imagined by Bryne and his certifiables, nor is it practised by any legitimate, professional hedge fund I know–and I know a lot of them).

Byrne lays out in great detail the same bizarre scenario explicated at length on the Overstock conference call by “X-Files” O’Brien, full of paranoid delusions of market-making in “German exchanges” and the supposed “nudge and a wink” by which the DTCC supposedly gives free reign to the hedge fund Visigoths.

But that’s not even the most bizarre thing about these posts.

The most bizarre thing is that the Byrne postings on “Naked Shorting” have each been edited by Byrne himself as many as 8 times.

Posted: Sun Mar 13, 2005 6:04 am

Post subject: A Concise Summary of the “Naked Shorting”

Last edited by hannibal on Mon Mar 14, 2005 6:24 pm

edited 8 times in total.

This is a CEO who really likes to write on message boards.

Yes, some unprofessional, bad guys short stocks naked. No, Overstock.com’s problems are not naked shortsellers. They are, by and large, professionals who think, among other things, a man who spends part of his day alerting his auction site readers to an upcoming appearance on Charlie Rose (also on the message board), and who has taken up the banner of a bizarre, paranoid and highly delusional individual who goes by the alias “Bob O’Brien” is probably not the guy you would want running a fast-growing public company.

Especially when earnings estimates are coming down.

Jeff Matthews I’m Not Making This Up