A Dozen Questions for Dr. Byrne

It's been a heck of a week for Overstock.com (Nasdaq: OSTK  ) -- and anyone who follows the company. For those of you returning from vacation or living under rocks, CEO Dr. Patrick Byrne held a conference call last Thursday to discuss Overstock's lawsuit against David Rocker's hedge fund, Gradient Analytics, and assorted John Does. All were engaged, Byrne said, in a vast conspiracy to drive down Overstock's share price. Shortly thereafter, Byrne went on CNBC to start naming additional names, most of them journalists, who he alleged are in collusion in the matter. Yesterday, he squared off against analyst, hedge-fund manager, and outspoken market blogger Jeff Matthews in the greatest 15 minutes of television I've seen in the past year.

Today, Rocker fired back a countersuit. To be frank, things have gotten ugly.

In fact, since I penned my thoughts on the matter, "Bob O'Brien," the anonymous Rasputin in this sordid affair, promoted little ol' me to junior member in this vast scheme. Conspiracy fans will no doubt be excited to learn that my mother's family name is Eisinger, though I'm pretty sure I'm not related to Jesse Eisinger, the Wall Street Journal writer who's high on Bob's (and Byrne's) enemies list. Though I'm flattered to have joined the ranks of Bob's big baddies, I find the insinuation that I'm on the take from hedge funds to be both hilarious and sad. I mean, I drive a beat-up truck with those wood things sticking up in the back, eat leftovers for lunch, and wear pants from Target, for crying out loud. Obviously, they're sending those checks to the wrong Seth Jayson.

The real truth is that I've got little to gain and -- if my employers weren't stand-up folks -- plenty to lose by criticizing Byrne and Overstock. People I trust and admire count themselves as friends of the CEO. And Overstock happens to be one of only two companies that has been recommended by two of our newsletters: Motley Fool Hidden Gems and Motley Fool Rule Breakers. But the Fool strives to be motley for a reason, and our coverage of Byrne and Overstock has been consistently positive (maybe too positive) until now. I figure someone needs to play Sith-Lord's advocate, and since I'm a former shareholder whose opinion was swayed 180 degrees solely by Byrne's increasingly alarming behavior, I've taken the role.

Give and take
After my article, Byrne requested a chance to respond to my comments on our pages. We agreed to an interview, but he requested that any give-and-take occur via email. I thought it would be more fun (and save space) to do it this way, which is pretty close. I'll ask some questions that interest my colleagues (some of whom are still long on Overstock) and me. Readers can offer their opinions on our boards, and I'll post Byrne's answers, which he can send by clicking the email link in my name at the bottom of the article.

All I'll ask of Dr. Byrne is that he try to limit his answers to 300 words per question and not read from his script on Regulation SHO. He's had ample opportunity to disseminate his opinion on that in his recent interviews and press conferences, so we don't need to rehash it all here.

The questions
Dr. Byrne:

  1. How can investors be sure that this entire drama isn't just the result of a colossal clash of egos?

  2. You alleged last Friday on CNBC that Herb Greenberg -- among other journalists -- is actively participating in this conspiracy in order to help Rocker and others front-run or otherwise trade illegally in your stock. What, exactly, do you claim is the motivation for the alleged conspiring journalists?

  3. You said on CNBC last Friday that the only evidence you have in this case is affidavits given by people who claim to have previously been involved in the scheme. In yesterday's CNBC interview, you read from an affidavit which said, "it appeared" that the players in the conspiracy were orchestrating attacks on you. Is that the strongest evidence you've got?

  4. Why should anyone, in the public or the courtroom, trust the statements of people who were (or are) involved in perpetrating the very same stock scam that you're protesting?

  5. How much is this litigation going to cost Overstock shareholders, including the money needed to defend against the lawsuits that have already begun to come your way?

  6. Let's be honest. You know more than one billionaire, and you say that you, family, and friends already own an enormous piece of Overstock. Why not just avoid the hassles of the public market, give shareholders the $77-ish per share that your lawsuit suggests the stock is worth, and take it private?

  7. You claim there is a "Sith Lord" controlling your stock price. It would seem to me that rather than trying to short Overstock straight into the ground, a clever Sith Lord would do better to let the stock rise at some point, and play both sides of the action. Have you any evidence that your stock's big rise in late 2004, or any subsequent pop, could have been orchestrated by the Sith Lord, prior to taking his short position?

  8. Your lawsuit claims that the Sith Lord's conspiracy is directly responsible for the fall in your stock's price. Yet other heavily shorted stocks that appear on the Reg SHO list, such as Netflix (Nasdaq: NFLX  ) , NetEase (Nasdaq: NTES  ) , True Religion (Nasdaq: TRLG  ) , and Shanda (Nasdaq: SNDA  ) are doing just fine, as you can see from this chart. How do these companies resist the power of the Sith, and why can't Overstock do the same?

  9. For better or worse, you have become a controversial figure because of the naked short issue. Would Overstock shareholders be better served if you stepped down as CEO but remained as chairman of the board?

  10. What do your many family members, friends, and mentors like Warren Buffett -- who have achieved business success in their own right -- think of this effort?

  11. There's been a lot of controversy regarding your relationship with "Bob O'Brien," a man who hides behind a pseudonym and issues vicious, unsupported attacks against anyone who disagrees with him. Do you think your shareholders would be better served if you distanced yourself from him and his organization, which you have helped to fund?

  12. Fast-forward a year. You've won damages of $500 million in this case. Do you track down all past shareholders from the period of the alleged damages and pay them for their losses? Do you pay it to current shareholders as a special dividend?

For related Foolishness:

At the time of publication, Seth Jayson had no positions in any company mentioned here. View his stock holdings and Fool profile here. Netflix is a Motley Fool Stock Advisor pick. Netease and Shanda areRule Breakerspicks. Fool rules are here.


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