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


4 thoughts on “Overstock.com: A Dumpster Fire Waiting To Happen

  1. Read your article and comments at Alpha. These pro-crypto folks are the antifa of the financial services industry. This has turned into a religion.

    I was a financial planner for 30 years and left the industry in 2012. Experienced the craziness of 1987, 2000 and 2008. I left because I did not want to be offering advice with what I fear was coming. What is happening now is those times on steroids.

    Thank you for what you do and I really enjoy the Mining Stock Journal.

    1. Thanks Joe. I agree. Their zeal for something nobody really understands except maybe the NSA and a few other sovereign intelligence organizations reminds of the zeal with which dot.com bulls defended their “turf” and attacked critics back in 1999

  2. How to understand Bitcoin and cryptos currencies:

    Quadrillions of fiat chasing Billions of Cryptos

    It’s that simple.

    Where is the bubble? In fiat debt……

    1. Except…there’s this thing about legal tender laws that elevate fiat above mere ones and zeroes…and the fact that ones and zeros are not cash.

Leave a Reply

Your email address will not be published. Required fields are marked *

Time limit is exhausted. Please reload CAPTCHA.