On the heels of yesterday's after-hours disclosure of the decision to sell Otravel, one perceptive Fool noted that Overstock.com (NASDAQ:OSTK) shares aren't the only things that CEO Patrick Byrne likes to buy high and sell low.
He's referring to Byrne's O-stock subsidiaries, at least the once-ballyhooed Otravel.
The upcoming sale was the peach pit of the nasty surprise in Overstock's recently-released 10-K. The most striking headline will be that last year's loss was kicked up a notch to $5.01 per share to reflect an "impairment" of goodwill for this travel site, the former "Ski West." What that means, in plain English, is that Byrne paid too much for this business, and only now is the lack of value being reflected back to Overstock shareholders.
You may remember that Byrne brought Ski West into the Overstock fold back in July 2005, paying $25 million for it. The recent filing knocked back the goodwill value of the now-discontinued subsidiary by $4.5 million, or nearly 25% of the original price. Oh, and note that the letter of intent from the potential buyer is "non-binding." In other words, this isn't a done deal.
Given that Otravel produced an operating loss (before the goodwill impairment) of $2.4 million in the last fiscal year, I wouldn't be surprised if the buyer squeezed the big O a bit harder for the favor of taking this loser off Byrne's hands.
I would be remiss if I did not note that, in some ways, this is actually a good idea for Overstock. Shedding Ski West gets rid of a proven money-losing distraction and, hopefully, brings some cash back into the coffers.
But before you start jumping for joy, remember that it is merely the correction of one of Patrick Byrne's multimillion-dollar blunders -- one that he claimed was "above budget" as recently as June 2006, which was a far cry from the bragging he'd done in August of 2005, when he said that Ski West "could make $3.5, $4 [million], something like that," in a one-year period.
Four-million-dollar profit, $2.4 million loss ... Tomato, to-mah-to, I guess. Unfortunately for Overstock shareholders, the guy who makes all these promises that don't come true is still calling the shots -- that is, when he's not off promoting vast Sith-Lord conspiracy theories, chasing ever-elusive "naked shorts," suing legitimate shorts, smearing critics, precipitating failed SEC investigations of same, suing brokerages, trying to write (then salvage) anti-naked-short legislation in Utah, defending his venom-spewing "Director of Social Media" on dubious Internet message boards, or writing amusing public threats to "do" his opponents "slow."
Comments? Bring them here.
At the time of publication, Seth Jayson had positions in no company mentioned here. See his latest blog commentary here. View his stock holdings and Fool profile here. Fool rules are here.
