Once upon a time there was a tavern Where we used to raise a glass or two Remember how we laughed away the hours And think of all the great things we would do
Those were the days my friend We thought they'd never end We'd sing and dance forever and a day
We'd live the life we choose We'd fight and never lose For we were young and sure to have our way.
La la la la...Those were the days, oh yes those were the days
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Column: Overstock and Wall St. Get Cozy
January 30, 2005
Business - Reuters
By Michael Flaherty
NEW YORK (Reuters) - Patrick Byrne, the outspoken chief executive of Overstock.com Inc. (Nasdaq:OSTK - news), has called Wall Street bankers "bullies" or even the "tools of Satan" and, until recently, he has written them off as a corrupt class prone to kickbacks and cronyism.
He had such little faith in investment bankers that he essentially took them out of the process when his company went public in 2002 through a Dutch auction -- the method later used by search engine Google Inc. (Nasdaq:GOOG - news).
But within the past few months, Byrne has warmed up to some of these "bullies." And they, in turn, have nuzzled up to his company, whose stock shot up 247.3 percent last year.
Overstock sold more shares in a Dutch auction secondary offering in May 2004.
But Byrne was dissatisfied with that deal, he said. Some of the bidders he expected never entered the auction. When the offering closed, the 1.2 million shares sold for $30.50 per share -- below Overstock's share price at the time -- and about $8 lower than where the stock was trading when the offering was announced.
"The world really was not ready for a Dutch auction secondary," he said.
CONVENTIONAL WISDOM
So Byrne went about the next offering -- a stock and convertible note deal worth about $169 million -- the old- fashioned way. Lehman Brothers, Piper Jaffray and Legg Mason Wood Walker, three of Wall Street's finest, underwrote the deal in mid-November. W.R. Hambrecht, the firm that carried out both Dutch auctions for Overstock, was the fourth underwriter.
"The deal in November went a lot more smoothly," Byrne said in an interview. "It reopened my eyes to the idea that there are some decent and honorable people who are conducting themselves on Wall Street, and it's OK to be in business with them."
Overstock quickly found that doing a deal the conventional way can bring added benefits.
A month before the November offering, Piper's research branch started covering the company, giving the stock an "outperform" rating. In mid-December, Lehman picked up coverage of Overstock, rating it an "overweight." Legg Mason initiated coverage earlier in the year, upgraded the stock to "buy" on Oct. 25, and downgraded it in early December.
Between Piper's and Lehman's research coverage, the price of Overstock shares rose 82 percent.
Lehman Brothers did not return calls seeking comment.
The Piper Jaffray analyst said he could not comment.
The price of a share of Overstock surged from the mid-teens in January 2004 to a 52-week high at $77 in December even as the company posted four consecutive quarterly losses.
Overstock.com issues fourth-quarter earnings after the closing bell on Thursday, with analysts expecting the company to earn 7 cents a share, according to Reuters Estimates.
The fact that Overstock.com has turned to more conventional methods of raising money may point to an inevitability in the business world.
"Wall Street still is king," said Shane Johnson, a professor at the Mays School of Business at Texas A&M University. "The reputation of the existing players and their established marketing networks is just too powerful to ignore." (The Lifting column runs weekly. Questions or comments on this column can be e-mailed to: michael.flaherty(at)reuters.com) |
