March 2, 2006 7:00 PM PST

Overstock 'jihad' divides father and son

Even Overstock.com Chairman John "Jack" Byrne, the father of CEO Patrick Byrne, wants his son to give up his fight against bankers, investors and journalists who the younger Byrne claims are trying to purposely deflate his company's stock price.

In an interview with CNET News.com, Patrick Byrne acknowledged that taking up the issue, which has made him one of the nation's most controversial executives, has prompted his father to consider stepping down as chairman.

"I've never expected him to (understand) this fight," said Patrick Byrne of his father. "He's been making noise about stepping down."

Jack Byrne was quoted on the Wall Street Journal's Web site on Thursday as saying that "Patrick and I have had some wonderful times together on Overstock, but we've also had some stormy times. I'd rather keep my relationship with my son than be the chairman of the board...I don't think it's a wise idea to be chairman with a headstrong son."

The younger Byrne said that his father "thinks this is too much of a distraction for me" and disagreed with his father's assessment, but did admit that he has been distracted at times.

Patrick Byrne said he commits 10 to 12 hours per day overseeing the e-tail company, but then dedicates most of his spare time to waging what he calls a "jihad" against short sellers. He says unscrupulous "shorts" use a variety of ways to illegitimately pressure a stock, such as stirring up bad press about a company. Such accusations, as well as a sometimes rambling hour-long speech last summer during a conference call with analysts--when he alleged a mass conspiracy existed against his company--have prompted many Wall Street insiders to label Byrne a whacko, he says.

Nonetheless, Byrne has kept up his fight. Last August, Overstock filed suit against Rocker Partners, a short-selling hedge fund, and Gradient Analytics, a research firm. Both firms are bearish on Overstock, which is profitless.

Apparently, not everyone is writing Patrick Byrne off. The Securities and Exchange Commission has opened an investigation into Rocker Partners and Gradient, according to several published reports. However, it recently backed off from subpoenas it sent to journalists critical of Overstock and whom Patrick Byrne has accused of being "lackeys" for short sellers.

Of his and his father's relationship, Patrick Byrne says it's as good as ever.

"There is no feud whatsoever," Patrick Byrne said. "We remain quite close...we're wired a bit differently. He brought me up teaching me about how bad Wall Street is, how Wall Street is so evil."

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8 comments

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In the short run...
the stock market is a popularity contest. In the long run it's a scale. The boy is focussed on the wrong things.
Posted by scdecade (329 comments )
Reply Link Flag
Best way to stop people shorting .....
Actually post a profit. Instead of rallying against the forces the "besige" you, why not do something. Like post a profit. You focus on "beating up the shorts" because they're stopping you from dumping your own stock at inflated prices.
Posted by canadaboy (14 comments )
Reply Link Flag
Jousting with windmills
He can't win this fight. Almost everything said about stocks is
opinion. Without any kind of hard facts at issue, the legal system
is going to spit any lawsuit right back out.
Posted by J.G. (837 comments )
Reply Link Flag
Isn't there something wrong with this?
Short selling is buying/selling stock you don't even own. Naked short selling is buying/selling stock that doesn't even exist (more than the float). Instead of betting or aiding a stock to go down, why don't you just not buy the stock? These are just money games that the rich use to manipulate. If you don;'t believe in the company, don't buy their stock. By short selling large amounts, you are actively trying to lower the share price. There are no innocents here.
Posted by ordaj (338 comments )
Reply Link Flag
A different view
1. The value of a stock is going to fluctuate up and down
regardless of normal short selling. If one can take advantage of
an increase in a stock's price, why not a decrease in value? That
in and of itself does no harm to a company.
2. By selling short you are still making a committment to buy
shares of the stock, just at a later time. That in and of itself does
no harm to a company. The stock may go up or down in the
interim.
3. You say that these are money games that the rich use to
manipulate. My view is that short selling is a tool that anybody
trying to get rich or just earn a living can make use of. There is
no "manipulation" inherent in selling short.
4. You are right that large sell orders are likely to push a stock's
price down, but I agree with other here that OverStock is
vulnerable to this because they are turning a profit. Of course
the Shorters are going see this as a good bet. Post a profit and
the Shorters may lose their shorts.

I've sold short in the past. I'm not rich. I wasn't manipulating
anyone. I was trading by the rules, using those rules to my best
advantage. At times it worked in my favor, at times it cost me.
But I can tell that for every share of equity sold, there has to be
one purchased. It's up to OverStock to make sure that there
underlying business forces the stock value to rise, it is not the
job of the trader.
Posted by Greg Sparkman (82 comments )
Link Flag
The "O" stands for Overpriced and Overhyped
Who's stupid enough to buy those "O"verpriced items on Overstocked?

And now, the "O" looks like it stands for OverInbred.
Posted by kamwmail-cnet1 (292 comments )
Reply Link Flag
why own a stock that is losing money?
why would anyone want to own a stock that is losing money? I'm
sorry if I don't understand the logic of this. I suppose there are a
lot of businesses one could buy that are losing money every day, in
fact, we can start a corporation together. You give me your money
and I promise to waste it for you.
Posted by mountaintop234342123 (12 comments )
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