Overstock.com is Now 'Wellsfargostock.com'
My favorite corporate fraud poster child, Overstock.com, is noted mainly for its juvenile, delusional CEO Patrick Byrne, its junk lawsuits against critics and shorts, and its inability to make money. You have to wonder, who would be dumb enough to loan this sleazy company money?
Well, the name of that company is Wells Fargo, but according to a document filed with the SEC yesterday, the bank has taken extraordinary steps to safeguard its money.
Under an amended credit agreement, Overstock is pretty much under the thumb of Wells Fargo:
The Agreement includes affirmative covenants as well as negative covenants that prohibit a variety of actions without the lender's approval, including covenants that limit the Company's ability to (a) incur or guarantee debt, (b) create liens, (c) enter into any merger, recapitalization or similar transaction or purchase all or substantially all of the assets or stock of another person,Overstock agreed to these humiliating conditions for the obvious reason that it needs cash, lest it slide (as it inevitably will, I suspect) into bankruptcy. These new restrictions prevent Overstock from doing dumb things it has done in the past, such as buy back stock, and also makes an interesting reference to its accounting methods.
(d) sell assets, (e) change its name or the name of any of its subsidiaries,
(f) make certain changes to its business, (g) optionally prepay, acquire or refinance indebtedness, (h) consign inventory, (i) pay dividends on, or purchase, acquire or redeem shares of, its capital stock, (j) change its method of accounting, (k) make investments, (l) enter into transactions with affiliates, or (m) store any of its inventory or equipment with third parties.
But I wonder why Well Fargo didn't include an obvious prohibition: "(n) retain a conspiracy-mongering loon as CEO."
© 2009 Gary Weiss. All rights reserved.