In a rambling, hour-long Internet conference call Friday, Byrne flashed a verbal light saber at hedge fund operators and market researchers he claims are profiting by driving down the price of his company's stock.
Byrne warned "the Sith Lord of this stuff, and you know who you are, [that] if the feds catch you . . . they are going to bury you under the prison and I'm going to enjoy helping."
The call came one day after Overstock.com unveiled an unfair business practices lawsuit against Gradient Analytics Inc. and associated hedge fund investors.
Filed in Superior Court of California for Marin County, the suit contends Scottsdale, Ariz.-based Gradient actually is linked to at least one hedge fund, co-defendant Rocker Partners.
Rocker, the suit says, specializes in short selling - an investment strategy where stock is borrowed and sold, with sellers betting they can buy back the stock and bank the difference when share prices fall.
The suit also names Gradient owners James C. Bettis and Donn Vickrey, and executive vice president of research Matthew Kliber; Rocker Partners sister companies Rocker Management and Rocker Offshore Management and their owners, David Rocker and Marc Cohodes.
Rocker did not return a call seeking comment, but Gradient's Kliber - while declining direct comment on either the lawsuit or Friday's conference call - did issue a brief statement.
"Every day, mutual funds and hedge funds alike rely upon us for our forensic accounting, corporate governance and executive behavior analysis," it read in part. "We regard their confidence in our research as a testament to the independence of our research process."
Meanwhile, reaction from longtime Overstock.com observers ranged from supportive to bemused.
Rebecca Kujawa, an analyst with the Stanford Group, said there was no question that "short interest in the company's shares [has] been high."
She came short of endorsing Byrne's conspiracy scenario. "I suspect he has information to back it up . . . but this just distracts from what is going on in Overstock.com's business.
"Their revenue growth [over $500 million in 2004] has been tremendous," she added, noting her firm has a "buy" rating for the company's stocks and is predicting profitability by late 2006.
However, Seth Jayson, a columnist for the popular, Internet-based investment newsletter Motley Fool, seemed to wonder less about the power of the Dark Side on Overstock.com's fortunes than he did Byrne's grip on reality.
He wrote on Friday that Byrne has gone "off the deep end" and, "These days, Byrne is looking nuttier than my Aunt Betty's chocolate bars."
He added: "Even if it's true that Rocker and these analysts are in bed together, there's absolutely no logic in the argument that their alleged conspiracy is responsible for the cratering of Overstock's share price."
In its suit, Overstock.com claims that beginning June 2003, Rocker, Cohodes and Vickrey had direct input in nearly 60 negative reports issued by Gradient about the Utah company. The number of Overstock.com shares that were sold short exploded, with the result of shares tumbling from a high of $77.18 in January 2005 to Friday's closing price of $46.87, up $3.12 and 7 percent from Thursday's trading.
While the suit does not specify damages being sought, Byrne said Friday his company's losses were easily "in the high hundreds of millions of dollars."
With the aid of 39 Powerpoint slides, Byrne showed stock sales patterns over the past couple of years and diagrams purportedly exposing connections between hedge fund figures, market researchers, rumored, but unconfirmed complaints to the Securities and Exchange Commission and Justice Department about Overstock.com, and even negative news coverage.
At one point, he speculated short-sellers may have used a variety of offshore brokerage accounts, trading back and forth between them, to artificially boost trading volume.
bmims@sltrib.com
