Overstock.com Report on TheStreetSweeper

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TheStreetSweeper, a site investigates and reports on public companies, released a report last week on Overstock.com. The article, called “Under Surveillance,” said that the company’s stock is massively overvalued. The stock price shot up when Overstock jumped on the cryptocurrency bandwagon:

Overstock’s crypto-fueled stock surge began in August, after the online retailer began allowing shoppers to pay with bitcoin and other digital tokens.

In September, the company announced plans for an exchange to trade tokens.

In October, the CEO announced a subsidiary, tZero, intends to hold an ICO – initial coin offering – from Nov. 15 until Dec. 31. Rather than shares of stock, digital tokens would be issued in the private placement.

After hovering around the $16 and $17 range for months, Overstock’s stock price started climbing rapidly. Since August, it has gone from around $19 to more than $44 per share. Why did the stock price climb so fast? It was a massive short squeeze. StreetSweeper says the short squeeze is over and the stock price should drop around 30%.

There are plenty of problems with cryptocurrency, so it’s not going to save Overstock. Particularly when the company’s operating results are terrible, according to StreetSweeper:

  • Overstock is unprofitable. It lost $14 million the first half of this year.
  • The price-to-cash flow – 739 times cash – is ridiculously high.
  • Today’s price is ~$15 over analysts’ average 12-month price target of $30.50… Implying about a 34% downside.
  • Overstock’s gross margin – 19% – is worse than 81% of its peers.
  • The company’s growth rate seriously lags behind rivals’

It is all amusing to me because in 2008, I regularly mocked Overstock.com and Patrick Byrne on this blog because of their shady accounting, but the real heavy lifting in uncovering their financial statement fraud was done by Sam Antar. Do I think the company has changed its ways? Of course not. If their numbers look pathetic as reported, I can only imagine what we’d find if we spent some time digging into them.

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