Byrne's Latest Gambit

Overstock.com chief executive/conspiracy theorist/journalist-taunter/short-and-analyst-suer/"miscreant"-blamer Patrick Byrne held a conference call today on his company's ever-increasing red ink.

Being Patrick Byrne, he spent a goodly amount of time talking about stuff other than the aforementioned red ink, among them a gambit aimed at sticking it to those evil short-sellers.

Byrne suggested that shareholders might want to take their shares out of "street name" and register them under their own names, which just happens to make them impossible to short. He and the company's press release noted that Overstock had joined something called the Direct Registration System, or DRS, which (the SEC website notes) "enables an investor to electronically move his or her security position held in direct registration book-entry form back and forth between the issuer and the investor's broker-dealer."

Some skeptics (I guess Byrne would call them "miscreants") sneer that if he just hates naked shorts and not ordinary short-sellers -- as he and Overstock insist -- why is he promoting a tactic to make it harder to legitimately short-sell Overstock shares?

Actually that's not the only problem. As the SEC points out, selling shares under DRS can also be a bit cumbersome, as one has to transfer the shares directly back to one's broker to do so (unless Overstock has a plan in place to allow shareholders to sell, which would be nice). Of course, the shareholders most likely to participate in the DRS are naked shorting cultists who probably wouldn't sell their shares until the "miscreants" are brought to justice. In other words, never.

Byrne's gambit won't work, by the way. History has shown that the only proven method of pushing up the share prices of bad companies is that they stop being bad. And Byrne just hasn't figured out a way to do that.

UPDATE: Why does Byrne do this? Turns out this has nothing to do with Overstock. Hell, this is just his way of serving his country in its hour of need!

© 2006 Gary Weiss. All rights reserved.

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