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”