Tag Archives: Overstock.com

Short Sell Ideas: Will Overstock.com End Up At Zero?

Overstock’s attempt to capitalize on “blockchain mania” appears to have fallen flat. The SEC is investigating it ICO fund-raising scheme and a class-action lawsuit has been filed in connection with the deal. OSTK finally announced today that it was pulling its attempt to unload 4 million shares on the public. This is after a failed effort to sell its e-commerce business. Meanwhile, OSTK’s operating losses are mounting, including a big loss in Q4, a period in which retailers can put on a blind-fold and make money.

I believe OSTK can be profitably shorted at its current price of $33 if you are willing to endure periods in which the stock might respond to highly promotional announcements from the Company that would cause the stock to spike up temporarily. My ultimate price target is below $10.

As I write this (Thursday, March 29th), CNBC is reporting that Overstock has canceled its 4 million share offering, though the Company has not issued a formal press release to that effect. The reason given is “market conditions.” If this is true, in my view, it means that a lack of demand at the current stock price – $37 – would have necessitated pricing the deal significantly lower in order to place the shares. I would suggest that this indicates that OSTK stock is headed lower anyway.

Seeking Alpha published my anlysis on OSTK, you can read the rest of here: Overstock.com: An Epic Short Opportunity

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Overstock.com: A Dumpster Fire Waiting To Happen

Overstock.com stock price has run from $15.95 on August 2nd this year to a 12-year high of $65.70. If closed Monday this week at $46.10. The incredulous run-up in OSTK was ignited when OSTK decided to grab onto the coattails of the cryptocurrency mania. The company announced on August 8th that it would begin to allow shoppers to pay with Bitcoin and other cryptos. Then in October, OSTK announced that its tZero subsidiary would, along with two JV partners, launch an alternative trading system for ICO-issued crypto-coins. The announcement further fueled OSTK’s remarkable stock move since August.

While it’s too early to know if OSTK’s crypto stunt will generate any degree of financial success, its e-commerce business is eroding. From 2013 to 2016, OSTK’s net income plunged from $84 million to $12.5 million. For the company’s first 9 months of 2017, OSTK has generated a net loss of $14 million (10-Q).

Buried in the 10-Q is a disclosure that CEO Patrick Byrne’s mother and brother loaned the Company $40 million at 8%. Interest is payable monthly and is secured by the headquarters building. Proceeds were used to pay off the bank debt. Why would Byrne do this given the bank loan rate was a little over 4%? I would suggest OSTK may have been in violation of covenants and U.S. Bank tried to accelerate the loan. I would also suggest that a market-priced loan would have been at a significantly higher rate. It reflects a high degree of financial stress.

To read the rest of this article, please click here:  OSTK/Dumpster Fire – Seeking Alpha

IT’S ALL ABOUT THE “O”