I have to admit that I have not kept tabs on OSTK and I do not have an opinion, either long-term or short-term. Their CEO, Patrick Byrne, certainly is aggressively pumping his stock.
Overstock's Chief Restates View That Market Favors Amazon
By TONY COOKE
DOW JONES NEWSWIRES
February 9, 2005; Page C6
WASHINGTON -- Overstock.com Inc. Chief Executive Patrick Byrne said he doesn't hold a short position in the shares of Amazon.com Inc., but he recently did buy more of his own company's stock, and he continues to endorse the logic that led him to short Amazon shares a year ago.
Mr. Byrne, who bought 20,000 shares of his company's stock last week, was among three Overstock insiders who bought a total of 41,000 shares for an average price of $48.08 a share, or nearly $2 million total. The company's shares fell 34 cents at $53.60 in Nasdaq Stock Market composite trading.
The Overstock chief executive created a bit of a stir last February when he disclosed the purchase of about $13 million of his Salt Lake City-based company's stock and said publicly that he had also sold short the shares of Internet retail competitor Amazon.com.
He contended at the time, and reiterated in an interview yesterday, that the stock market places a higher value on Amazon shares than Overstock shares, creating an arbitrage opportunity because eventually that discrepancy will disappear through some combination of a drop in Amazon shares and a rise in Overstock shares.
"If you short one and buy the other, you can count on [at least] one of the trades working out," he said.
A short seller sells borrowed stock and hopes to profit by buying back the stock once its price has fallen, returning it to the lender and pocketing the difference.
Recently, Mr. Byrne said, "Amazon was being traded at about 25 times or 30 times our market cap." However, in the fourth quarter, Amazon reported sales of about $2.54 billion, compared with Overstock, which had sales of $221.3 million.
Mr. Byrne said he expects Overstock's sales figures to rise to perhaps a sixth of Amazon's sales by the end of the year. And he said he expects the stock market to eventually value the companies more similarly.
"The market is not going to say they are worth 25 times more than us," said Mr. Byrne. In fact, since Mr. Byrne bought his shares last week and Amazon put out an earnings report widely regarded as a disappointment, the market capitalizations of the two companies converged considerably. Amazon's $15 billion market cap is about 14 times that of Overstock.
A spokeswoman for Seattle-based Amazon said the company wouldn't discuss Mr. Byrne's analysis.
Write to Tony Cooke at tony.cooke@dowjones.com |
