08 November 2017
London
Reporter: Drew Nicol

Overstock CEO fails to scare off the bears


Online retailer and blockchain incubator Overstock has seen its share price rise by 81 percent to close last week at $44.55, but short sellers are jostling to position themselves for a downturn.

FIS Astec Analytics put Overstock as the top pick for its hot stocks list for the Americas for the week starting 30 October.

According to FIS data, short interest has gathered pace since the start of September, increasing more than five-fold to a peak of 97 percent of the available shares, before ending the week at just over 92 percent.

Part of Overstock’s recent share price increase has been attributed to that fact that tZero, an Overstock subsidiary, will be conducting an initial coin offering, with the final details expected this week.

The revelation came as part of a conference presentation last month by Overstock CEO Patrick Byrne, who used the platform to argue that the settlement crisis of September 2008 was caused by “mischief on the securities lending desk”.

Over-allocation of locates by agent lenders, resulting in borrowers engaging in naked short selling, was at the heart of what went wrong in 2008, said Byrne, speaking at the Money20/20 financial technology conference in Las Vegas.

Byrne stated: “2008 was a settlement crisis. The thing that actually caused the government to act was when the settlement system froze on the morning of Wednesday 15 September.”

He explained: “It did that because of the mischief on the securities lending desk that underlies short selling.”

Outspoken CEO has been a vocal critic of short sellers of his company in the past, and only recently settled a long-running legal battle against with a group of broker-dealers, after securing a $20 million settlement from Merrill Lynch.

Merrill Lynch Professional Clearing Corporation was the last defendant standing in the litigation over allegations of naked short selling, which were first brought in 2007 and concluded in 2016.

Byrne and a group of shareholders initially brought the litigation against 11 broker-dealers in California, claiming they engaged in naked short selling that drove down the retailer’s share price and hindered capital raising efforts.

The retailer settled out of court with all of the defendants, except Goldman Sachs and Merrill Lynch.

The case against Goldman Sachs was eventually dismissed due to a lack of jurisdiction, but Overstock filed a fresh case in New Jersey, making racketeer-influenced and corrupt organisation (RICO) allegations and accusing the bank of securities fraud.

Goldman Sachs agreed to settle the new action out of court, admitting no liability.

More news
The latest news from Securities Lending Times
Join Our Newsletter

Sign up today and never
miss the latest news or an issue again

Subscribe now
Hedge funds continue 2017 run
23 November 2017 | Madrid | Reporter: Drew Nicol
Global AUM of hedge funds rose 24 percent to $3.2 trillion in the past two years, according to data captured by IOSCO’s latest market survey.
Goldman Sachs appointed by Thrivent for agent lending
23 November 2018 | Minneapolis | Reporter: Jenna Lomax
Thrivent Financial has appointed Goldman Sachs as it new lending agent
ICMA maps repo and cash bond operations
22 November 2017 | Zurich | Reporter: Zsuzsa Szabo
ICMA has launched a free-to-read mapping directory for more than 80 technology solutions for repo and cash bond operations
FCA publishes MiFID II guide
22 November 2017 | London | Reporter: Jenna Lomax
The guide focuses on the regulatory regime in MiFID II for trading venues and data reporting services providers
Hedge fund industry reaches new highs in Q3
22 November 2017 | London | Reporter: Zsuzsa Szabo
The hedge fund industry has recorded strong performance in Q3 2017, after stumbling in 2016, according to Preqin
India reviews SBL position limits
21 November 2017 | New Delhi | Reporter: Zsuzsanna Szabo
The Securities and Exchange Board of India has altered its securities lending rulebook, following market calls for change
EU Commission opens consultation of SFTR TR fees
21 November 2017 | Paris | Reporter: Drew Nicol
UK-based trade repositories may be forced to shoulder additional third-party recognition fees to operate under EU regulatory frameworks post-Brexit, according to proposed EU Commission rules