I’ve been contemplating this topic for a couple of weeks, but just didn’t have the stomach to write about it. Fortunately, Gary Weiss has mentioned it and given me the courage to suck it up and write about it.
What’s the topic? The ever-nauseating Patrick Byrne, CEO of Overstock.com (NASDAQ:OSTK). Since at least 2005, he has been ranting about Sith Lords and conspiracy theories. The whole thrust of his argument was that there was a vast conspiracy to tank the price of Overstock’s stock via Naked Short Selling (NSS). It never mattered to Patrick Byrne that he couldn’t prove that NSS was having a measurable effect on Overstock’s stock price. He said it was so, and that made it so for him and his followers.
The more lucid observers of the Overstock.com tale know that if the company’s stock price is too low, it’s simply because the company can’t turn a profit. In spite of Patrick Byrne’s hyping of the company’s performance and use of make believe calculations that mislead investors, the company is simply a bad company run by one of the worst CEOs in the country. Overstock.com might have a valid business idea, they simply can’t execute.
Yet Patrick Byrne consistently falls back on his NSS conspiracy theory to explain away his company’s problems. Even his own father thought his NSS stuff was pie-in-the-sky. That didn’t deter Patrick. He went on countless news programs to promote his theory that the sky was falling because of NSS.
But now Byrne’s story has changed. He predicted the sky was falling. (Notice the convenient exclusion of the “because of NSS,” which has always been a critical component of his conspiracy theories.)
That’s right. Now Patrick Byrne is claiming that he predicted the Wall Street meltdown, but no one would listen to him. He’s even got news channels agreeing that he predicted the drama. Have they not researched this issue? Haven’t they seen that he was predicting NSS drama, not just a general meltdown?
For the longest time, none of Byrne’s previous rants even mentioned any of the substantive issues that are at the heart of this financial mess that has exploded over the last month. The closest he ever came was mentioning a meltdown and cheap credit (start at 3:23), but that wasn’t said until December 2007, when basically EVERYONE was in a panic because of the real estate and mortgage problems. It’s not like this was some big revelation by Byrne in December.
It hasn’t mattered that Patrick Byrne and his three ring circus haven’t been able to pull together any conclusive proof that any company has been damaged because of NSS. Their rantings about the crisis and conspiracy related to NSS that would rock the financial world were all nonsense.
(Not that NSS doesn’t exist. It does. I just don’t believe it’s nearly as big a problem as the Byrne followers would like us to believe. And there still exists no real proof to back up their assertions. All there exists are smears against financial journalists by Byrne and his flunky. Their opinions aren’t proof, however.)
Now the script has been changed. Instead of the reality of Byrne predicting gloom and doom because of NSS, the story is now that Byrne was predicting doom and gloom in general, and by golly, he was right. The Overstock.com spin machine is going strong!
EDIT: Here’s a nice piece from Overstock.com’s website about Patrick Byrne’s claims that the sky is falling. It’s all about Naked Short Selling, and not this general “I told you the market would blow up.”
Patrick Byrne is waging a fight with Wall Street over naked short selling. He believes that, through the practice of naked shorting, Wall Street is cheating Main Street America and destroying small companies for a profit. Byrne feels that the SEC is failing to protect retail investors and small companies because it has been captured by Wall Street, and that the New York financial press is similarly co-opted. Byrne believes that the SEC’s efforts to eliminate this abusive practice are falling short, not simply for Overstock (which has itself been on the Regulation SHO Threshold list for over two years), but in a way that creates the possibility of systemic risk for our financial world.