Short OSTK

During some last minute shopping I happened to stumble onto OSTK's website and I have to say it is very much improved since I last time I looked at it. The last time I looked OSTK was in the 40's and I just bought some puts on it. It was a poorly performing company then and it is too bad if it is now also because this is the climate that they should be minting gold.

It is funny but the best offense against the naked shorts would be to run a efficient operation and post some good numbers. I do see naked shorting as a problem but mostly because I can not do it myself.
 
In a nutshell folks:

Byrne and his capital-destroying ilk are upset that creative shorting techniques have prevented them from CORNERING the stock of broken and deteriorating companies like OSTK. With the the stock cornered, disingenuous managements and bankers could float additional worthless shares at an inflated price. We'd be back to 1925-29 and the stock syndicates.

That is why simply enforcing the naked shorting rules won't fly - because enabling these types of corners (VW anyone??) is a worse evil. No responsible regulator could justify such a move, and they won't do so.

So if Byrne wants to call creative shorts a Sith Lord (his own words) he, and we, must ask "What is lower than a Sith Lord?" I think you know the answer ...
 
Blue, interesting perspective. If you are right then the naked short issue is the lessor of two evils and there may not be a good solution, except of course, to run a profitable operation or go out of business (or not to have capitalized the business in the first place as a public co).

Secondly, using your reasoning could explain why Buffett offers no help in the ostk battle, he may recognize a "corner" or what could eventually lead to if the nss issued is stopped.
 
As a problem solver, you resemble Putin.

And Buffett? I have no idea why he doesn't help his 'friend', which would be helping us. But I love his GE, GS trades. Now, he knows what it's like.

There is no excuse for breaking laws. You can see the result.
 
As Jules from Pulp Fiction said, "Well allow me to retort."


But Fly-dude is being dishonest with himself, his audience, or both, and I find it offensive and perverse. Inefficient allocation of capital has real costs to all of us - even innocents who are not market participants. Fly is baldly promoting allocation inefficiency in his own (and friend's) interests at the very real expense of society. I find it offensive, criminal, sinful - choose your word. And I will continue to speak out as I see fit.

I believe that you are fairly one-sided when you make your argument about efficiency. Let's say OSTK is a POS company; fine. But one cannot dispute the fact that running a stock in the ground has far more extreme negative consequences to a company than the extreme positive consequences from running its share price up inordinately high.

In other words, shortsellers get on a bandwagon and can cripple a stock which, in turn, can have devastating consequences for the company. Access to capital dries up, ratios get out of whack, capital then must be reallocated from marketing, R&D, etc. (i.e. profit-generating activities) to debt service, further pushing the likelyhood of profitability and solvency down. This is obviously cyclical, and more shorts jump in blindly for no other reason than trend-following.

From an ethical standpoint, shortselling should be eliminated.

Here's my analogy. If I believe your house is overvalued in the current real estate market, can I sell it, pocket the proceeds, and wait for a decline in market value? Of course not! YOU OWN IT. But humor my theoretical example for a second: Suppose this was legal and I happened to have some friends who were especially influential in your local real estate market. My buds might appraise comps at an artificially low valuation, inevitably and eventually driving down the value of your home. OK, now I "repurchase" or cover and I profit. Doesn't sound fair, does it? Of course not. And that's why it's not possible to short sell in any other asset class (that I am aware of) besides intangible financial instruments. Substitute your house with any other physical asset you happen to own and envision this occurring and you will see the absurdity of the concept.

Now, the analogy is not perfect but you get the point. Hedge funds and other shorts creat a domino effect that artificially drive prices down. Before someone responds with the "shortsellers add liquidity" argument, I have two responses: (1) other assets can be bought and sold in markets that are liquid that do not provide shorting ability and (2) stocks can fall without short-selling. This will happen as a natural course of action when buying dries up and selling pressure builds.

The ability to naked short sell has perplexed me since I learned what it was. This takes shorting to the extreme and is so ridiculous as to be self-evident. In the real estate example, how in the hell would I get away with "creating" imaginary houses to sell to unsuspecting buyers then buying-to-cover said houses in a declining overall market before the buyers even ask what the address of the property is (or ask to see the property? Remember someone out there already PAID for the house). Again, when you subsitute other asset classses that are tangible things, the absurdity of this proces jumps out and slaps you across the face.

We can agree that Cramer is an assclown. (Not sure how that entered the discussion.)

Because the deepcapture story links Cramer with shortselling the way I recall it.

I would agree that the COMPLETE SET of securities regulations and laws, including LISTING REQUIREMENTS, is seriously flawed.

You have a point there. As are the mechanics of naked short selling. Don't tell me that with the SEC, FINRA, the Federal Reserve, and a boatload of clearing regs that this process cannot be stopped systemically--as in not allowing these trades to transact in the first place. The problem from my perspective is the turn-the-cheek relationship of many of these hedgies with their prime brokers. In short, corruption and securities fraud. It's not right...but too many people are getting paid.

I've been following Fly's posts for a few years now. (You've been on ET how long???)

This relevant how..?
 
To reply to Bull's latest post:

I believe that you are fairly one-sided when you make your argument about efficiency. Let's say OSTK is a POS company; fine. But one cannot dispute the fact that running a stock in the ground has far more extreme negative consequences to a company than the extreme positive consequences from running its share price up inordinately high.

You can't look at it exclusively from the perspective of the company. There are also negative consequences to a burglar of getting locked up ... should that prevent us from locking him up?

Current status quo is that OSTK destroys about $50k of capital (US$5-mil losses/quarter), steady state. That means every day, 365 days a year, OSTK is generating losses of $50k. It has done so for several years. Neither Byrne nor anyone else has offered any plausible scenario under which the company will ever generate a sustainable profit.

Think about the opportunity cost of $50k per day. Are there some alternate uses of $50k per day?? Should a ponzi of ever fresh shareholders continue to cough up $50k/day to preserve the jobs of OSTK employees?? How about we invest in some clean energy technology instead? Or begin to pay off our national debt? Or contribute to worthwhile charities? Is OSTK a worthwhile charity?

Existing OSTK stakeholders (Fly?) will bear some negative consequences of shuttering the company. They took a risk that didn't pan out. The company has already been run into the ground. US%149-mil in debt but only US$145-mil in assets. Without another donation by oblivious or altruistic investors, its already over for OSTK.

Traders ought to understand better than most, that it is bad to double down on a loser. OSTK is a hopeless loser. And no, that is not name-calling, but a fair assessment of the company's persistent loses.

I've been following Fly's posts for a few years now. (You've been on ET how long???)

This relevant how..?

You accused me of not considering Fly's position. To wit: "Instead of listening to flytiger's position, you are in an incessant loop .."
 
Quote from BlueHorseshoe:

To reply to Bull's latest post:

I believe that you are fairly one-sided when you make your argument about efficiency. Let's say OSTK is a POS company; fine. But one cannot dispute the fact that running a stock in the ground has far more extreme negative consequences to a company than the extreme positive consequences from running its share price up inordinately high.

You can't look at it exclusively from the perspective of the company. There are also negative consequences to a burglar of getting locked up ... should that prevent us from locking him up?

Current status quo is that OSTK destroys about $50k of capital (US$5-mil losses/quarter), steady state. That means every day, 365 days a year, OSTK is generating losses of $50k. It has done so for several years. Neither Byrne nor anyone else has offered any plausible scenario under which the company will ever generate a sustainable profit.

Think about the opportunity cost of $50k per day. Are there some alternate uses of $50k per day?? Should a ponzi of ever fresh shareholders continue to cough up $50k/day to preserve the jobs of OSTK employees?? How about we invest in some clean energy technology instead? Or begin to pay off our national debt? Or contribute to worthwhile charities? Is OSTK a worthwhile charity?

Existing OSTK stakeholders (Fly?) will bear some negative consequences of shuttering the company. They took a risk that didn't pan out. The company has already been run into the ground. US%149-mil in debt but only US$145-mil in assets. Without another donation by oblivious or altruistic investors, its already over for OSTK.

Traders ought to understand better than most, that it is bad to double down on a loser. OSTK is a hopeless loser. And no, that is not name-calling, but a fair assessment of the company's persistent loses.

I've been following Fly's posts for a few years now. (You've been on ET how long???)

This relevant how..?

You accused me of not considering Fly's position. To wit: "Instead of listening to flytiger's position, you are in an incessant loop .."
More...

You miss two (x 100) relevant points. !. I don't own it. 2. If you listen to the video, this has nothing to do with Overstock.

But, in your world of lies and innuendo, I can understand you spinning both to your belief (benefit).

All the cursory observer has to do, is listen to the vid, take two steps back, and look around. What happened?

PS> You make such a cogent argument, short the hell out of it. Have at it. No one has any gripe if you legitimately borrow (diff from a locate) and short it. I wish you well. But I think you're a blowhard, and a pussy. You've spent all this time analyzing this for some reason known only to you, and I'll bet you're not short. But you want other people to short, or at least scare out longs. Now tell me. Why?

Rhetorical question. I know. And the next few weeks are going to be very difficult for you. Because we win, going away. Law and order is coming back, granted as a draconian measure, but we have to start somewhere.
 
One more go-'round and I'll sign off:

Current status quo is that OSTK destroys about $50k of capital (US$5-mil losses/quarter), steady state. That means every day, 365 days a year, OSTK is generating losses of $50k. It has done so for several years. Neither Byrne nor anyone else has offered any plausible scenario under which the company will ever generate a sustainable profit.

Think about the opportunity cost of $50k per day.

You are clearly fixated on this $50K/day OSTK metric. Is it sustainable? Of course not. But my opinion is that the sharholders will or have priced this in. You certaintly know that there are more factors that affect a stock's price than fundamentals. (Were you shorting AMZN hand over fist in 1996,1997,1998?) My point is that the market should price this in; if existing longs become disillusioned by a company's growth prospects, they dump the stock. When they outnumber buyers the stock will plummet naturally.

Are there some alternate uses of $50k per day?? Should a ponzi of ever fresh shareholders continue to cough up $50k/day to preserve the jobs of OSTK employees?? How about we invest in some clean energy technology instead? Or begin to pay off our national debt? Or contribute to worthwhile charities? Is OSTK a worthwhile charity?

This is where you really lose me. This line of reasoning smells like socialism (or fascism) to me and I have some comments. You mention "how about we invest..." Who is "we?" The shareholders have collectively decided to invest their own capital in a public company. If they lose their investment, how is it your right to make a value judgement on the opportunity cost of that lost money? You should be unaffected; it has nothing to do with you.

Idealism such as paying the national debt or investing in clean energy is great, but what does this have to do with shareholders who have invested in public corporations?? Are you suggesting that the government somehow intervene in a public company because of its unprofitablilty, conficate investors' capital and redeploy it as part of a package that the feds can spend as if it were collected taxes? I certainly hope not.

We still have some capitalism in this country and I'd like to think that we'll have some left in four years. But I highly doubt it.

Existing OSTK stakeholders (Fly?) will bear some negative consequences of shuttering the company. They took a risk that didn't pan out.

Right. So let them take the financial haircut and be happy you were correct should the stock implode.

I've been following Fly's posts for a few years now. (You've been on ET how long???)

This relevant how..?
You accused me of not considering Fly's position. To wit: "Instead of listening to flytiger's position, you are in an incessant loop .."

Well we can agree to disagree on this one. I've read a bunch of flytiger's posts and some of his naked shortselling links have been mighty informative.

You have not really addressed my argument on (naked) shortselling. Instead you are laser-focussed on how much money one public company (OSTK) is losing. I am concerned with the principle of the process (shortselling), its legality and how it affects the markets.

It's been fun. Happy Holidays.
 
I don't think this is a good time to short OSTK. The reason most people even know of the company is because of Patrick Byrne, so the stock has a certain presence in their head. That's like someone buying Google because they use it everyday, or worse, some people a few months ago were asking "Is this a good time to buy AIG?". Good if you want to lose everything. People only think of an investment theme when it's smack in front of them, the OSTK short is probably overcrowded indeed.
 
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