Overstock.com dukes it out with short sellers
The Associated Press, 12 June 2006
Most people buy stock hoping the price goes up, but hedge fund manager David Rocker was “shorting” shares of Utah-based Internet retailer Overstock.com Inc., betting the share price would decline.
Rocker’s fund was making a legal bet that Overstock shares in 2004 were overvalued and due for a correction. Overstock.com CEO Patrick Byrne, however, sued, accusing New York-based Rocker Partners of collaborating on disparaging reports with the stock-research firm Gradient Analytics of Scottsdale, Ariz., while Rocker was shorting the shares.
Byrne, a former boxer-in-training who holds a black belt in karate, is fighting mad at unnamed “Sith lords” he says are out to ruin America’s small companies. Not only is he suing, he enlisted Utah’s governor and legislators to crack down on short selling, and federal regulators are investigating his complaints.
Hedge-fund managers and other institutions defend short selling as legitimate way to trade on a company’s perceived shortcomings and say Overstock.com became a target only because of its poor performance.
