Overstock and Patrick Byrne Continue Naked Short Selling Jihad
Thomas J. Catino, 08 November 2008
Overstock.com (Nasdaq: OSTK) President, Dr. Patrick Byrne, has continued to up the ante in his vocal public battle against a coordinated campaign of short sellers who have allegedly targeted his company’s shares. After appearing over the summer on a CNBC Street Signs segment with anchor Ron Insana, Byrne continued to emphasize that “what’s at stake here is innovation and entrepreneurship in America.” With strong words, Byrne said that his “company has been attacked and I’m not going to take this lying down.”
Overstock.com, which launched its website in 1999 to sell products at wholesale prices, now has annual revenues of approximately $500 million. In the financial world, however, the company is not as well known for its business, but the controversy surrounding an alleged campaign to denigrate the company. Towards the end of the summer, Overstock.com filed suit against Rocker Partners and Gradient Analytics, alleging that the hedge fund and research company conspired to drive down the company’s stock in a scheme known as naked short selling. Generally speaking, naked short selling is defined as selling a security short without borrowing the necessary securities to make a delivery, thus resulting in a failure to deliver the securities to the rightful owner. The main goal of naked shorting is to engage in harmfully affecting the stock price of a company in order to manipulate and create downward pressure on the security, affecting a company’s ability to raise money on the open market, and ultimately profit from the downward movement in the company’s shares.
