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| Company type | Public (Nasdaq: OSTK) |
|---|---|
| Industry | Retail |
| Founded | 1997 |
| Headquarters | Cottonwood Heights, Utah, USA |
| Key people | Patrick Byrne, CEO |
| Products | Overstock.com |
| Revenue | $788 Million (2006) |
| Website | www.overstock.com |
Overstock.com (Nasdaq: OSTK) is an online retailer headquartered in Cottonwood Heights, Utah. Nearby Salt Lake City is commonly listed as the company's location in corporate filings and news accounts.
Business model
Overstock.com is an online E-commerce marketplace, in which Internet users purchase surplus and returned, as well as new merchandise. Overstock.com was founded in 1997 under the name D2: Discounts Direct, and changed its name to Overstock.com in 1999.
Roughly 60% of Overstock.com merchandise is sold on behalf of third parties participating in Overstock's Partner Program - which mostly include wholesalers but includes some manufacturers, and smaller retailers that have standing business relationships with Overstock.com. Overstock's Partner Program began in 2000 and has over 700 partners. The remainder is purchased by or manufactured specifically for Overstock.com. The company also purports to manage the inventory supply for other retailers, and says that it enables small retailers to purchase stock at below-wholesale prices.
Overstock.com also functions as a marketplace for new merchandise at cut-rate prices.
Overstock.com says its main rivals are eBay, Amazon.com Marketplace and Yahoo! Auctions, however, Overstock's revenues, site traffic and marketshare currently lag far behind eBay and Amazon.
In addition to its direct retail sales, Overstock.com has also offered online auctions on its website since September 24, 2004. The auction services include several features intended to enhance security, social networking and convenience. It has hosted charity auctions to benefit various causes.
For the fiscal year 2006, Overstock suffered a 6% decrease in overall sales and lost over $100 million on less than $800 million in sales.
The company's distinctive television advertisements feature German actress Sabine Ehrenfeld. These advertisements feature double entendres, as they talk about the "O" and the "Big O", which means both "Overstock", and calls to mind "Orgasm" (, , ).
Anti naked short-selling campaign
The company has received attention, not all of it favorable, stemming from CEO Patrick Byrne's battle against alleged naked short selling of his company's shares. Byrne has claimed that his company's shares have been attacked by what he describes as "miscreants" in the stock market. Critics maintain that Byrne is seeking to divert attention from Overstock's share price declines and failure to turn a profit.
Byrne has also sued a hedge fund, Rocker Partners, claiming it colluded with a research firm, Gradient Analytics, in short-selling the company. His claims have been vigorously denied. Naked short-selling was not alleged in that suit. A Securities and Exchange Commission investigation of Gradient was dropped in February 2007, but the investigation of Overstock was not dropped.
Byrne's campaign has been widely criticized, with New York Times columnist Joseph Nocera saying: "Except for a few fellow-traveling Web sites, where Mr. Byrne is viewed as a heroic figure, most people who understand the issue or have looked into it think it's pretty bogus." SEC Chairman Christopher Cox called abusive naked short selling “a fraud that the commission is bound to prevent and to punish.”
In May 2006, Overstock.com received a subpoena from the SEC, requesting information about the company's accounting policies as well as its communications regarding naked short selling. Though Byrne said in a press release that he "celebrated" receiving the subpoena, critics of the company viewed it as an indication of Overstock's mounting troubles. Herb Greenberg, a journalist with Marketwatch.com and CNBC, termed the response "feeble spin control."
Byrne was instrumental in passage of anti naked shortselling legislation in Utah that was repealed in February 2007. Repeal of the legislation led to tension between Byrne and Utah officials. A New York Times report stated that "Utah officials now feel they were snookered by the Overstock C.E.O." and that the affair had damaged Overstock's political influence.
In January 2007, it was revealed that an anonymous website that attacked critics of Overstock.com, including media figures and private citizens on message boards, was operated by an executive of Overstock.com.
In May 2007, Overstock.com disclosed in an SEC filing that Patrick Byrne been had been personally served with an SEC subpoena one year earlier. Overstock had received a similar subpoena shortly before Byrne, and that subpoena was disclosed. The delay sparked controversy. . The investigation of Byrne and Overstock is continuing.
Departures from the board
In July 2006, John J. Byrne, the father of Overstock's chief executive, resigned from the board of directors, reportedly due to his "new role as White Mountains Insurance Group," although the departure came soon after a public airing of the elder Mr. Byrne's unhappiness with his son's crusade against naked short-selling.
On February 23, 2007, John A. Fisher resigned from the Overstock board of directors. This action, he said explicitly, was "precipitated by disagreement with the company's pursuit of the lawsuit against the Prime Brokers."
On May 24, 2007, Ray Groves likewise resigned from the board. In his letter, he too said this related "to the Company's prime broker suit."
References
- Floyd Norris, The New York Times (June 14,2007). "S.E.C. Ends Decades-Old Price Limits on Short Selling".
{{cite web}}: Check date values in:|date=(help) - Susan Antilla, Bloomberg News Service (Feb. 21, 2007). "Overstock Blames With Creepy Strategy".
{{cite web}}: Check date values in:|date=(help), Mitchell, Dan, "Flames Flare Over Naked Shorts," New York Times, Roddy Boyd, The New York Post (Jan. 2, 2007). "Overstock.com Lashes Out at Critics on the Web".{{cite web}}: Check date values in:|date=(help)