Monday, April 23, 2007

Patrick Byrne Trips Over His Big Mouth

Patrick Byrne, the repulsively fascinating CEO of the red-ink machine, was doing a mean pirouette last night on an Internet message board -- and wound up digging a deeper than usual hole for himself and his company.

Seems that way back in March 2006, Byrne said the following in a posting on the Motley Fool message board:
PPS Big story breaking next 24 hours. Stay tuned.
The post can be found here (subscription required).

Now, I am not a securities lawyer by any means, but in this era of Regulation Fair Disclosure and an SEC that is sometimes hypersensitive on disclosure issues, Byrne's blatant stock-pumping might be a little.... well.... problematic, wouldn't you say?

Particularly since there was indeed some activity within the "next 24 hours" -- an idiotically bullish article by investor Arnie Alsin.

The Alsin article caused the stock to explode. The shares, which traded at 22.85 on March 10, climbed 12% to 25.55 on March 13, and another 25% to 28.50 on March 14l, on massive (for Overstock) volume of more than 2 million shares each day. Nice! Until you consider that Alsin was dead wrong. The shares have since skittered down to 17 1/2 and have traded at a lot lower than that.

Confronted with this blast from the past over the weekend on the Investor Village Overstock message board, (perhaps inspired by this Motley Fool article by Seth Jayson) Byrne tap danced and curtsied -- and came forth with the following:

"Odd that you don't quote from that one"? You might find it even odder that Byrne did not "quote from that one."

Or at least it would be odd -- if that post actually exists. As best as I can tell, it does not.

Seth Jayson of the Motley Fool (Byrne's bloviation venue in the Spring of 2006), observed as follows:
Where, I wonder, is this face- (or neck-) saving "disclosure," as to what Patrick was talking about. I haven't seen a single clarification from Hannibal100 in any of the posts made under that user name on this board subsequent to the original "big news" post -- and I just read every single one of them
Further proof that the "clarification post" dwells only in Byrne's vivid imagination can be found in a June 2006 post on another Motley Fool board from a Byrne supporter. One user had pointed to the "big news" comment, and the Byrne defender responded, "Nonsense. I forwarded your post to Dr. Byrne. He replied that the big news he was referring had not happened yet. "

Now that I believe.

What makes this frantic damage control kind of silly is that Byrne could have saved himself the trouble.

I doubt that it matters to the SEC, which is investigating Overstock (or, as Overstock's 10-K put it, conducting an investigation "on" Overstock) whether this "clarification" really exists on some message board in Outer Mongolia. Call it a little more than a hunch.

Although Byrne, remarkably, referred to Internet message boards as the kind of public disclosure forums contemplated by Regulation FD, that's a questionable proposition at best -- if for no other reason that Byrne rarely identifies himself as CEO of Overstock, and keeps his "profile" private.

But there are other reasons, and plenty of them. The most obvious is that the IV Overstock message board is anything but a fair, open discussion forum. Investors asking sharp questions of Byrne and the company have been repeatedly harassed on the IV message board, attacked as "paid bashers" and worse, by Byrne and "social media director" Judd Bagley.

Byrne and his lapdogs appear to have the ear of IV management. One critic of Byrne, Sam Antar, was kicked off the board for antagonizing Byrne and his minions. It would not surprise me if Byrne's latest nemesis, "Tamoshanter," is bounced for irritating Byrne. That was evident in another Byrne rant last night, in which he spoke of the need to "strip" message boards of "cloggers" -- Byrnespeak for "getting rid of people who criticize Patrick Byrne or ask him tough questions." Veiled threats like that, aimed at silencing critics, are typical Byrne/Bagley fare on the IV message board.

I also have more than a little hunch that when the dust clears, and Overstock is a foul memory, all these Regulation FD concerns will be small potatoes.

Still, I think that watching a CEO and company melt down is fascinating. So I'll be keeping an eye on him. Next up: a conference call on Wednesday announcing the volume of red ink gushing from the Overstock P&L.

© 2007 Gary Weiss. All rights reserved.


Wall Street Versus America was published by Penguin USA on April 6.
Click here for its listing and here for more information on the book, from my web site,

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