My favorite corporate sleaze poster child, Overstock.com, plummeted 41% today on
immense volume, despite the usual happy-talk
conference call featuring a slap-happy CEO Patrick Byrne and chirping
minions. As usual, all was sweetness and light, glossing over the fact that
sales and marketing expenses zoomed 80% as the company puked red ink for the
umpteenth consecutive quarter.
The reason for the shares plummeting,
however, appeared to be that one of Overstock's analysts, who are notoriously
timid in their assessments of this company, had the temerity to downgrade the
company to "sell." The reason: fear that the company may not "grow" as much as
previously.
While it's nice to see one of the sell-side analyst worms
turn, I'd say that this sudden realization that all is not well with Overstock
is astonishing. Two of my favorite bloggers, Sam Antar and Tracy Coenen, both experts at
corporate fraud, have been pointing out the weakness in Overstock's accounting
for many months.
Unless these analysts are deaf, dumb and blind, they
would surely know that Overstock takes Sam and Tracy very seriously -- and has
deployed three paid stooges, led by the nauseating
Judd Bagley, to attack and discredit them.
Sam has specifically
warned that Overstock was distorting the "growth" numbers reported to the
public. He set forth his case in exhaustive detail. But analysts and the clowns
at the SEC -- who just gave Overstock's accounting a clean bill of health --
paid no attention.
Until today, analysts have studiously ignored the
company's shortcomings, its accounting issues, and other obvious stuff such as
the sheer looniness of its CEO, and have swallowed whole the pronouncements of
the company. Which only goes to prove that far too much of what passes for
research on Wall Street is pretty near useless. That is especially so for
companies such as Overstock.com, which make it their business to intimidate
critics.
It's not surprising that Byrne placed Eliot Spitzer on his
enemies list when he targeted overoptimistic Wall Street research. Aggressive
research is the enemy of inept and crooked CEOs. Today's events demonstrate that
even tepid research stating the obvious can have a devastating effect.
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