Stock Talk: Overstock Over Shorted Part 2

Is Overstock really oversold? I belive so. But the way their CEO Patrick Byrne is handling things is really, well… sad. Byrne has dedicated his time to battling the current stock market process, with all types of theories of loopholes, corrupt practices, and such. He claims that OSTK has been a target for naked short selling (more shares short than float!) which is driving his stock down. It seems like many of the hedge funds are taking it personal and are attempting to drive OSTK down further. I can see why Byrne is angry. As the CEO, his source of pay is only through stock options, no salary. And as an insider who bought millions of worth at the highs, this is no doubt troubling him. His retaliation gives him the reputation of a “cry baby.” Well at least that’s what comes to my mind. Byrne was affected by this so much that he turned over most of his operations in the company to a friend. Dr. Byrne, you really need to get focused and start preparing for the next earnings report in July. I really hope this is not a desperate attack to turn the stock around. Like I said before, the best way to scare the shorts is to perform and beat expectations. I would cover immediately on a company with strong fundamentals.

Nevertheless, Byrne is doing a good deed for the overall market. His dedication to expose fraud and educate the public about corrupt practices in the market is a big plus for the small investor. I too believe their is manipulation in the stock market here and there by those who have the money to do it. And I am cheering hard for Byrne to get the SEC to do something about it. But then again, how do we know the SEC is not in on some of the capitalist loopholes? You can find Byrne’s work at the Sanity Check Blog which tracks naked short selling. There are great slideshow lectures that can teach you all you need to know about the market in about an hour.

Anyway, I hope Overstock can get things together. I must admit, I bought puts in the stock after hearing it was targeted for unusual naked short selling back in December. Now, I’m out. The strategy is too well known and too played out- everyone everywhere is shorting Overstock! All they need is one good report, and the bomb will explode. Tic toc tic toc.

BTW, tomorrow is the Senate hearing on naked short selling. Too bad it had to occur on the day Bernanke opens his dirty mouth. My guess is that attention will be shifted away from Byrne’s odyssey.