Overstock CEO Says Utah Officials "Folded" Under Wall Street Pressure

None by KCPW

(KCPW News) The outspoken CEO of Overstock.com says Utah officials folded to the pressure of powerful Wall Street lobbyists in agreeing to postpone changes to its securities laws adopted during a special legislative session in May.

"Wall Street has sent its lobbying groups to Utah since then to lobby night and day, and they've won," says Overstock.com CEO Patrick Byrne.

The new laws are intended to crack down on an abuse known as short selling, in which traders sell stock they do not own in an effort to drive down stock prices.

Byrne claims the practice is hurting his business. In response to a lawsuit from top Wall Street brokerage firms, Utah has agreed to wait until next June to implement the new rules, hoping to give the Securities Exchange Commission time to enact changes on a federal basis. Byrne scoffs, saying the SEC has done nothing to fix the problem for years and says only a jury trial will do:

"Let's see Wall Street trying to explain to a bunch of postal workers and teachers and plumbers that there's something okay about hedgefunds and brokers taking money ov American investors and in turn just delivering IOUs for stock that they never owned," says Byrne. "You know I'd love to see them trying to explain that someday to an American jury."

In a written statement, the Utah Attorney General's office says delaying the new law will allow federal regulatory authorities to fully engage the industry on the issue and prevent costly litigation.

1. Dr June S Taylor said:

Your news report left out an important distinction - between "short selling" and "naked short selling". Short selling is a trading strategy where a broker/dealer or investor believes that a stock is overvalued and is likely to decline. It is an integral part of the way our capital market system works. Basically, it involves borrowing stock that you don’t own and selling it on the open market. You then buy it back at a later date, hopefully at a lower price, and as a result, making a profit.

Naked short selling is selling stock you don’t own, but not borrowing it and making no attempt to do so.

Short selling is completely legal, and is not "used to drive the price of stocks down." It is a standard method of arbitrage, or handling risk. Naked short selling can be legal or illegal, and the SEC & other entities claim it is rare. It does not appear to be increasing. Mr. Byrne wants to blame naked short selling - or maybe even just short selling, I don't know - for causing Overstock's valuation to decline. The extent to which "naked" short selling occurs is in dispute in the courts. Anyhoo - you should clarify the difference between "naked" & routine shortselling, and you shouldn't say that "short selling drives down the price of stock." Latter is not true.

2. Pat said:

"It does not appear to be increasing."

based on what?

OSTK's naked short shares (failures to deliver) increased drastically over the past 2 years and has not decreased yet.

TASR, NFLX, NFI - all increasing according to actual FOIA data released with great reluctance by the SEC....

3. John Fichtenkort said:

If Dr Taylor followed this topic at all, she would know that Dr Byrne always takes pains to distinguish between the legal short selling and the illegal abusive naked short selling. And yes, the SEC and the DTCC do claim NSS is rare, yet they will not make public the numbers to verify those claims. Moreover, entities like those that have fought the Utah law clearly wouldn't be very motivated to delay implementation if this practice truly was rare.

4. Mike said:

Are the short sellers the same people causing OSTK to post loses quarter after quarter after quarter...year after year after year?

5. Pat said:

That's it, Mike, change the subject.

Byrne isn't doing this because OSTK stock went down. But nice try at changing tracks.

After all, if your local grocery store is losing money, it's OK to rob it, right?

6. BCinvest said:

Well said Pat. If you are a developing company, that is no excuse for Wall Street hooligans to rob your shareholders blind and make raising capital difficult. What happende to fairness, truth , justice and the American way?

7. Carl W. said:

Utah needs to take a stand on this issue. Naked short selling, what little I know about it, is an extremely un-ethical thing to do. I for one happen to know Mr. Byrne and I can tell you, the man has more guts and heart than most of you know. To take a very unpopular stand, when you know it is right-that's courage.

Mike, maybe you could learn something from him, instead of simply hating people who have created success for themselves.

8. Anonymous said:

9. Vince said:

I think Byrne is doing it for just that reason. He keeps complaining to anyone who would listen that his company has been hurt by (naked) short selling.

Well, maybe if so many people are shorting the stock, there is some reason for it ?? Byrne should focuses on turning OSTK profitable, instead of crusading against naked short selling.

Once the company turns profit and he delivers value to the investors, only then he can go ahead and crusade against short (naked) selling.

Somehow, I think if that happens, he'll loose interest though ....

10. Gordon B Hinckley said:

Are you kidding me? Is this room full of Overstock staffers? This Byrne guy is an embarrassment to both the corporate world and the state of Utah!

The fact is that derivative markets exist to HEDGE risk, and do not BY THEMSELVES have anything more than SHORT TERM effects on pricing. This Byrne guy has been whining for YEARS about the effects of derivative trading on his beloved BIG O. Maybe Pat should start taking some responsibility for his company's pathetic position. Why don't you babies go back to Nursery where no one is allowed to criticize people for their poor performance and leave the grown-up world to work itself out in a market based fashion.

By the way, you whiney panty waist models, when Mike makes the point that Overstock's valuation slide might possibly be attributed to poor management and a failed business model as opposed to "secret cabals and Sith Lords" dedicated to the destruction of all that is good (or maybe just Overstock, that part is not exactly clear) you might want to consider the POSSIBILITY that he could be right before opening your wretched pie hole and confirm your abhorrent ignorance. phh... amateurs...