'Even if he escapes charges of market manipulation or insider trading, this is still a horrible look,' writes Tpoletti
One of Patrick Byrne’s last acts at Overstock.com Inc. appears to have forced a short squeeze that warranted the attention of the Securities and Exchange Commission, and the sell-off of his entire stake over the last three days is now raising questions about whether he tried to manipulate the market.
Byrne explained the genius behind his digital dividend in another blog post on his DeepCapture website, at the same time writing a post to Overstock employees about his sudden departure from the company last month and his controversial stock sell-off. None of this is going over well with investors, especially hedge funds who typically short stocks that they borrow, hoping to repay the borrows after a price decline and make money on the difference. In the last two weeks, Overstock’s shares have been on a roller-coaster ride, as investors started to realize that the digital dividend presented a problem for short sellers.
The SEC appeared to eventually step in, however. On Wednesday, Overstock announced a big change: that investors would not have to hold the dividend for 6 months, as was initially required, but could immediately begin trading the instrument. Overstock also postponed the record date for the dividend, and said it will announce a new distribution date, while suggesting that questions from unnamed “regulators” helped lead to the decision.
“If Byrne had intent to engineer a short squeeze then profited from selling into the price spike, that seems to be clear-cut market manipulation,” Nathan Anderson, founder of Hindenberg Research, which published a scathing report on Bloom Energy BE, +6.29% earlier this week, said Wednesday afternoon. “I’ve been both long and short Overstock in the past and frankly given these latest events I intend to be short tomorrow.
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