20 Years Lashed to the Mast

by Patrick Byrne

I took to these pages immediately upon departure because I felt it was necessary to clear up too many mysteries surrounding your firm immediately. I hope that in these backstories the clarity I provided agave small measure of solace to some. Yet the end of a year is supposed to be a time for reflections, and I would like to share mine.

Foremost among my thoughts, how badly I feel for the shareholders of OSTK who had a tumultuous and, in the end, disappointing ride this year. I feel horribly for them. Anything I might say beyond that sounds defensive. So I will stop there for a moment, simply to reiterate that point: I feel terribly for what happened this year. Like others, I thought you would be riding a stock many multiples of its current valuation by now.

Now having said that, I will go beyond to bring some additional thoughts to your attention.

  •  By no means whatsoever should you give up hope for the firm.

      °  Regarding the killer app of the blockchain revolution, security tokens, the firm has an enormous lead. You have seen my calculation that the industry of security token exchanges may be worth a lot. tZERO has a commanding lead. As far as I can tell, much of the competition in this field is fading, and tZERO’s lead is lengthening.

      °  The other blockchain assets are among the premier in the world.

      °  The Retail business can be managed to return to a steady stream of positive cash flow. It has also provided quite a fecund environment from within which to develop those other blockchain assets.

  •  The dividend we created this year was a major event. Yes, the SEC did derail it (cf. “The SEC Cries ‘Bazoomba!’”) I looks to me like Jonathan has teed it up again and has a clear path to success over the next 45-60 days short of the SEC doing another “Bazoomba!” (although, of course, the point of the Bazoomba! story is that when the referee changes the rules mid-game, anything is possible)

  •  Of course I have mixed feelings about my departure. Having had nearly five months to reflect:

     °  I hoped my departure was not going to be necessary, but then it became necessary. Yes there is Sturm-und-Drang about why it became necessary, and yes it was partly driven by hedge fund guys like Cohodes contacting directors and executives to convince them to force me out so the stock would reprice from $20 to $50 (I think we even had an analyst or two suggest it). Thus, it is tempting of me to try to connect all kinds of dots from all kinds of behavior over the summer, to try to piece together precisely why it played out as it did, but in the end there was no bad faith on the part of directors or colleagues or analysts. I think there was some bad judgement, and maybe a recrudescence of some corporate politics that are par for the course for any normal company (but were one round too many for me), bt at the end of the day I understand where everyone was coming from and can fault no one for it. Everyone involved thought they were doing what was best for shareholders. And (I say now with temper having cooled) perhaps it was something that indeed did have to happen. I wish I had been able to play it out in my own way, and see, but that said, it may well have had to happen anyway. Withhold judgement a few more months before deciding.

    °  The very hour I found out that while I had been navigating such difficult decisions not all around me had been as straight with me as I might have hoped, I also learned that the board “was concerned about the optics of any connection with [me]” and wished to be completely disassociated from me. In that instant I decided to punch out. I was angry because I thought the stock would be $40 or $50 over the course of the fall (“or $100!” if Cohodes could be believed), and that if I sold I might be getting half that. I was angry because I thought I was leaving behind the fruits of two decades, and felt like I was having the rug pulled out from under me. I figured I was walking away with a good fortune but leaving behind a far bigger one to those who stayed and finished the story. That it has not worked out that way so far is a surprise to me as it may be to you. And of course I feel terrible for those who have been hurt by this.

    °  On the other hand, my departure could make possible strategic conversations that might have been chilled with me there. Time will tell and I have no information in that regard.

So that was 2019. The Overstock team has come through a tough year. I am sure they are happy to have it behind them as well. They have risen to many challenges before, and have always done the hard things. They are superb, having come so far on so much less than everyone with whom they ever had to contend.

Maybe it was time, after all, that I got out of their way.