The Sith Lord Rears His Ugly Head Again

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The Sith Lord lives on, according to Overstock.com (NASDAQ:OSTK) CEO Patrick Byrne. I am thankful that we have Wacky Patty to look out for the interests of investors. He gave a speech March 3rd at the University of Utah, and the school newspaper wrote about his comments.

And who would have guessed that Byrne was going on and on about conspiracy theories? Again, he’s talking about naked short selling. And of course, naked short selling is the reason Overstock’s financial performance stinks and the stock is such a bad investment.

As usual, there is a conspiracy between journalists and hedge funds to screw investors. And now organized crime is involved, and Byrne laughably is quoted as saying: Continue reading

Overstock.com: Pretend Accounting Measures Muddy the Waters

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Patrick Byrne Overstock Conspiracy TheoryI present for you today one (just one) example of the accounting shenanigans at Overstock.com Inc. (NASDAQ:OSTK) to demonstrate the deception of management. This accounting concept is quite elementary, and it is called EBITDA.

EBITDA = Earnings Before Interest, Taxes, Depreciation and Amortization

Accountants and investors generally agree on what all of those items (earnings, interest, taxes, depreciation, amortization) are. So the computation of EBITDA is quite simple, if presented with accurate and complete financial statements. Continue reading

Sam Antar v. Patrick Byrne of Overstock.com

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Overstock Patrick BryneThe regular readers of this blog are familiar with the issues at Overstock.com. The company can’t turn a profit to save its life, but CEO Patrick Byrne blames that on short sellers. The fact is that the financial statements have some curious things in them, but Byrne never gets around to actually straightening out all the discrepancies.

This week Sam Antar offered Byrne an opportunity to do just that… explain discrepancies and answer questions.

You see, Patrick Byrne thought he was being cute during last week’s earnings call when he said:

Sam Antar, if you want to join us as an [inter-locketer], I have to stick around — I have to leave in 15 minutes but I’m hoping you’ll join, Sam.

This is none other than the Patrick Byrne who believes a Sith Lord is masterminding a conspiracy that is causing Overstock.com to be a horrible company. The same Patrick Byrne whose underlings threaten teenage bloggers. The same Patrick Byrne who is so interested in his job that he’s busy playing on the internet while he’s supposed to be paying attention to an earnings conference call for investors. The same Patrick Byrne who posts messages about Overstock.com on discussion boards without disclosing that he is the CEO of the company he’s hyping. The same Patrick Byrne whose financial statements hint to the possibility of earnings management. Continue reading

Why the Overstock Inventory Issue Matters

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It has been suggested that discussing the inventory issues at Overstock.com is a waste of time. Surely there is more interesting stuff going on. like Sith Lords and such.

So I’ll explain why it’s so important.

Inventory is a financial statement line item that is notorious for being abused. Some companies are loath to record proper reserves, and so inventory may be on the balance sheet at too high a value. On the other hand, when a company has a really good quarter, it may be tempting to overstate the reserve to create a little “cookie jar” for later. (The idea is that we recognize additional expense in this good quarter, since we still have “room” for more expenses. Then during a later quarter when numbers aren’t as good, we can dip into that reserve to pump up the earnings.) Continue reading