Shares of Overstock rallied on Thursday after the news that founder Patrick Byrne would resign his role as CEO and his seat on the board after his comments last week about his involvement in an FBI investigation and a romantic relationship with a convicted Russian operative as well as alleging involvement of the “deep state” and referring to federal investigators as the “men in black.”
Overstock shares had declined 36% after Byrne’s cryptic comments but gained back some of that ground amid rumors of a shakeup and were up as much as 16% in intraday trading on the heels of Byrne’s resignation.
Overstock was founded by Byrne in 1999 as a liquidator of excess inventory from the then-new e-commerce industry and went public in 2002. Byrne became embroiled in controversy from the start, alleging that big Wall Street firms conspired to hold down the value of Overstock shares because they were cut out of the IPO when Byrne chose to sell them to the public via a Dutch auction rather than engage the services of traditional underwriters.
Byrne later became engaged in a protracted battle with several large money managers over the practice of naked short selling, during which he again alleged a conspiracy that involved journalists, lawyers, Pakistani jihadists, the SEC and then-New York Attorney General Eliot Spitzer.
Overstock shares mostly languished in the $12-20/share range for almost a decade until the company became one of the first large retailers to accept Bitcoin as a payment method. Overstock invested heavily in blockchain technology and was briefly known more as a “crypto” business than as a retailer of goods.
In early 2018, Overstock shares his a closing high of $84.35/share before falling back to Earth with the crypto crash, trading mostly back near $20/share for the past year.
Like many other enigmatic and eccentric company founders, Byrne has been viewed as a genius in the best times and a distraction in the worst. His entrepreneurial drive and creative marketing ideas made Overstock a household name and allowed the company to thrive even as competitors failed, but his willingness to engage in complicated conspiracy theories often made him the butt of jokes in the financial world and ultimately led to Thursday’s resignation.
Overstock is currently a Zacks Rank #3 (HOLD) with stable revenues of roughly $1.65B a year while reporting net losses each quarter since Q1 2017. Generally, the resignation of a long-time CEO suffering public embarrassment would be viewed as a negative development, but Thursday’s rally would seem to indicate that investors believe that there remains a path forward for Overstock under new leadership.
Byrne’s public statement announcing his departure expressed sadness to have to cut ties with the company he founded but said it was “for the good of the firm.” Overstock board member Jonathon Johnson will act as interim CEO during a search for a permanent replacement.
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