Dave Patch comments on Rocker counterclaim and raises interesting issues in the world of big time shorting.
From: Patchie 11/12/2007 9:04:27 AM
3 Recommendations of 101379
My Letter to Karen Gullo of Bloomberg based on her article regarding the Rocker Lawsuit. I would send one to Carol Remond as well but that pig can't comprehend.
Karen,
A more in depth story would include running some research on timelines and events.
According to the Remond article, Rocker began shorting Overstock in February 2004. In February 2004 the stock was opening the month at $17 - $18.00/share and by the end of the month it was trading near $30.00/share (i.e. Rocker was in for a loss by the time he started). According to FOIA Data obtained on Overstock.com regarding Fails to Deliver in the stock had accumulated to over 260,000 by March 2004 (earliest recorded date at SEC). These wrong side short bets, by default, would cause a short squeeze as buy-ins (margins) come calling on the positions.
In addition, it was Rocker's Modus Operandi to contact the SEC and complain when they felt their investments were being manipulated by false accounting, PR's, etc... Did Rocker make such a filing to the SEC relative to Overstock.com and did the SEC find that there was no fraud. Certainly this is one bet that Rocker claims to have lost where his past have been supported by SEC Investigations that yielded little (TASR, NFI, Applied Capital, etc...) and is that why he thinks he needs to take it to court? If the SEC did not find fault, is this ploy just an attempt to use the lawsuit to manipulate the market to better his present short positions?
Rocker insinuates that Byrne and the Overstock Board were hyping the stock to inflate prices and to create a short squeeze. What is Rockers allegations for motive? Byrne and his dad (both listed in the lawsuit) have not sold any shares but have instead continued to increase their holdings. Both purchased large sums of shares in August 2005 well above Rockers initial short position.
As for the short squeeze itself, Byrne's real public interest in shorting (naked shorting) was in March 2005, nearly 13 months after Rocker initiated his short position in the security. From March of 2005 thru August/September 2007 the stock did nothing but fall. Thus, all the hype on short sales did little to push the stock up. Instead, the stock collapsed while the fails to deliver increased. If Rocker claims his losses stem from this most recent climb back from $14.00/share it would imply that he was just stupid and that any squeeze was a result of Rocker not paying attention to regulatory change. Certainly at $14.00/share he could cover his 2004 short positions at a profit.
Most amusing in all this is the media's reaction. Byrne was vilified by the financial press for going after the short sellers - all claims that he was blaming business losses on the shorts and taking the eye off the business itself. Last week Rocker did exactly the opposite and did so where the evidence indicates he could have profited and not had losses if he had not gotten greedy and nobody questions Rocker as they question Byrne. Ask yourself, how did Rocker lose Money short selling a stock that went from $80.00/share to $14.00/share and where more than 35% of the public float were in shorts that failed to deliver?
I am attaching some analysis I had conducted relative to fails to deliver on Overstock.com. You look at when the rise and falls came and explain to your readers how anybody could have really lost in the overall scheme of things. Rocker claims he lost money - was it a net loss or is he looking only at the lost trades and ignoring all the profitable ones. Lets report on what Rockers net profit/loss has been since February 2004. I'll bet he is net positive and is whining because his profits are not as much as he wants. That would infer he is just whining as you and others constantly blame Byrne for doing.
I challenge you to consider Rockers actions here in the same light as you did Byrnes. I question whether the financial press has the integrity to villify a short seller as easily as they did a public CEO. David Rocker whines, he whines to the financial press who become his mouth pieces and he whines to the SEC who conduct investigations on his behalf. Nobody seems to write those stories though - why not?
I am attaching some other FOIA Requests where David Rocker was a key investor of short interest. Do you see any patterns that should come into question
Dave Patch |
