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Patrick M. Byrne is President and CEO of Overstock.com. He is most known for his recent allegations that naked short sellers (whom he has referred to as the "dark lord of the Sith") have been targetting the stock of Overstock.com.
Background
Patrick Byrne received a bachelor’s degree from Dartmouth College (Asian Studies & Philosophy), a master’s degree in philosophy from Cambridge University as a Marshall scholar, and a doctorate in philosophy from Stanford University.
Byrne served as Chairman, President and CEO of Centricut, LLC, a manufacturer of industrial torches, then held the same three positions at Fechheimer Brothers, Inc., a Berkshire Hathaway company manufacturing police, firefighter, and military uniforms. Currently Byrne is CEO and President of Utah-based internet retailer Overstock.com.
Since Byrne launched Overstock.com in 1999, he and his company have garnered attention from numerous national media outlets, including the Wall Street Journal, ABC News with Peter Jennings, Fortune, CBS Marketwatch, and Business Week, among others, and is a frequent guest on Bloomberg TV, CNBC, and Fox News shows (such as Cavuto and Kudlow & Cramer). In 2002, Byrne was named to Business Week’s list of the 25 most influential people in e-Business: the magazine cited survival strength and vision as qualities that qualified Byrne for the list. In 2003 Ernst & Young awarded Byrne an “Entrepreneur of the Year” award in the category of Lifetime Achievement.
Byrne has a black belt in tae kwon do and once pursued a career in professional boxing. He has ridden a bicycle across the country four times: his last ride, in the summer of 2000, was to raise awareness and money for cancer research at the Dana Farber Cancer Institute. Byrne is also dedicated to helping the disadvantaged on a global scale. In 2001, he began Worldstock.com, Overstock.com’s socially responsible goods department, selling handcrafted products created by artisans from developing countries (and from underprivileged artisans in the U.S.) at extremely low prices: the artisans who create these products are paid an average of 70% of the price charged by Overstock.com.
Crusade against naked shorting
In 2005, Byrne began to believe that Naked Short Sellers were targeting the shares of Overstock.com. Short selling is a way for an investor to bet that the share price of a company will decline, namely by borrowing shares from someone else, selling them, and then when the price is lower buying them back to return to the person one borrowed shares from. The profit comes from the difference between the sales price and the amount one has to pay to buy the shares back. In naked short selling, one lies about having borrowed the shares, arranges for the sales of shares but then fails to deliver the shares. When the person buying the shares doesn't recieve them the transaction is reversed, and he gets his money back, but in the meantime a sale of the stock showed up to the market, possibly causing the price of the stock to drop which allows the naked short seller to take greater profits from the real short selling he is doing simultaneously. This works because many times investors have arrangements with their brokers that they can place buy or sell orders without having to deliver payment for a few days. However its usually against the policy of brokers, especially prime brokers (brokers for hedge funds), to allow this. Nevertheless Byrne alleges that this is occuring to his stock.
To announce his belief and the research associated with it, Byrne held a conference call which was widely publicized because of its many allegations, including comparing the short sellers to the "dark lord of the Sith".
Besides controversy over what many allege to be unstable behaviour of Byrne in the matter, there is a more general debate about whether a CEO should be concerned about naked short selling of the stock of his company. The reason is because if the CEO believes in the strength and future prospects of his company, naked short selling would cause the price of the company to temporarily fall, allowing the CEO to buy more of the valuable company at cheaper prices.
See also
External links
- Overstock.com
- Byrne's Pan-Mass Speech
- Fortune Magazine article on short-selling crusade
- Documents related to Overstock.com's lawsuit against Rocker Partners and Gradient Analytics
- "The bizarre world of Patrick Byrne's Overstock" - The Register
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