Wednesday, May 26, 2010

Patrick Byrne Dumps His Overstocked Overstock Shares's wack-a-doo CEO, Patrick Byrne, has apparently found a new kind of crud to foist on the his ever-suffering shareholder base--$3.1 million in shares.

White collar crime fighter Sam Antar has an analysis today of Byrne's dumping of the shares, which were shed by Byrne's wholly-owned hedge fund, High Plains Investments LLC.

Barry Ritholtz points out today that he owns shares in the company -- an example, I suggest, of the downside of quantitative investment strategies -- even though "I personally think it is a steaming pile of shit, that the CEO is an asshole, and that the entire company is probably corrupt."

He has some thoughts on the sale:

Is Byrne in possession of material insider information? Would he be so stupid as to sell the shares? (I doubt anyone could be that dumb).

Perhaps he sees a favorable outcome to the SEC investigation? Maybe he is raising money to pay a fine?

A favorable outcome of the SEC investigation is entirely possible. The agency, despite all the much-ballyhooed changes in its enforcement division, has retained the mantle of uselessness that it earned under Chris Cox and his predecessors. The Allied Capital fiasco certainly proved that. The question is whether Byrne's political connections and ex-SEC lawyers can prevent him from being penalized to the extent that he deserves.

Sam today provides a good review of the company's history of seeking to silence critics of its accounting -- which, of course, would make nonsense of any claim by the company that its serial book-cooking was "unintentional."

That would be obvious to any intelligent observer, which is why I have little hope that it will persuade the SEC. Still, the SEC pursued an enforcement action against Goldman Sachs when it was least expected, so perhaps another "man bites dog" moment is in the offing. Don't count on it.

© 2010 Gary Weiss. All rights reserved.

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