A year after Patrick Byrne ‘dropped the mic,‘ Overstock.com’s new CEO sees online sales surge

Pandemic-induced shopping seems to have transformed the fortunes of Utah online retailer Overstock.com.

Less than a year ago, executives at the Midvale company fretted over lagging sales and considered selling the firm after its founder and former CEO Patrick Byrne left in a cable TV swirl of intrigue and controversy.

But a surge in online shopping since March and unprecedented demand for home furnishings as sheltering customers redecorate their surroundings doubled Overstock’s revenues and sent the company’s shares flying.

“The tailwind was healthy,” Overstock CEO Jonathan Johnson said in an interview through Zoom on Wednesday. “We were already improving before, but when the time came, we were able to really take advantage of it.”

Johnson, a former candidate for Utah governor, said Overstock made its mobile platforms faster, hired new programmers and analysts laid off from other industries, and deployed machine learning to better connect buyers with products.

“We have strengthened our operational muscles, so to speak,” he said.

Changes within the company and in consumer habits since the pandemic began have pushed Overstock shares from $2.65 on March 16 to $103.65 at its latest all-time high Aug. 7 — and placed it among the fastest growing companies in the sector.

Many once-frustrated investors are now pleased. One even referred to the firm’s past execution as “an absolute “s--- show” in a July 30 earnings call with Overstock managers, compared with its latest upward trajectory.

“Jonathan, you deserve a lot of credit,” investor Marc Cohodes told Johnson on the call. “You have made it something quite special.”

The OSTK stock price has since pulled back from its early August highs after the company announced a second public offering of shares earlier this week as it seeks more capital “for general corporate purposes.”

Major investors battered the stock through 2018 and 2019 over what they saw as erratic management under Byrne’s tenure and an undue focus on a cluster of Overstock subsidiaries devoted to seemingly esoteric blockchain technologies.

Then last August, it all got wild.

Already known as outspoken and controversial, Byrne, now 57, issued a cryptic statement saying he’d carried on an affair with purported Russian spy Maria Butina while acting as an FBI informant.

In a series of confusing TV appearances, he referred to “Men in black” and his “Omaha rabbi” — a nickname for Berkshire Hathaway CEO Warren Buffett — as he claimed the romantic liaison with Butina had given him a key role in official probes of a “Deep State conspiracy” and plots against top U.S. politicians.

“I think we are about to see the biggest scandal in American history,” Byrne said in one early August TV interview. He resigned a week later from his longtime posts as Overstock CEO and board member, saying he hoped to insulate the firm he helped create from any fallout.

“I’ve been warned that if I come forward to America, that the apparatus of Washington is going to grind me into a dust,” Byrne said at one point on Fox News. “That’s going to happen and I have to get that away from the company.”

In late September, he abruptly sold his remaining $90 million stake in the company, saying he would invest in gold and other safe havens to shield against the coming political and economic firestorm over his allegations.

Several groups of investors later sued, accusing Overstock, Byrne and the firm’s former Chief Financial Officer Gregory Iverson of securities fraud over what they said were a series of misleading statements that artificially inflated Overstock’s share prices prior to Byrne’s sales.

Byrne then claimed to have fled the country, at first dialing in occasionally to update his personal blog at DeepCapture.com, ostensibly from a sailboat drifting in and out of cellphone range off the shores of Indonesia. It was a country he chose, Byrne said at one point, because it doesn’t extradite Americans to the U.S.

The former CEO has weighed in less frequently since January, at least on his blog. He did not respond this week to a Tribune email seeking comment.

Johnson, a long-time friend, said “there is still a lot of Patrick left in this company” — not least in optimism over the future of Overstock’s companies focused on the digital ledger technology known as blockchain.

The current board and management team sees great potential in tZERO, a cryptocurrency and blockchain-enabled trading platform launched in 2014. It has seen transactions on its system hit records in May and June, and volume is so far up 77% over the same time last year, according to company filings.

Overstock is also touting Voatz, a Boston-based subsidiary devoted to secure voting using mobile phones. “To me, it is the future,” Johnson said, “and it exists now.”

But Johnson, who unsuccessfully sought the 2016 Republican nomination for Utah governor against incumbent Gary Herbert — with heavy financial backing from Byrne — came to the company’s helm promising a renewed focus on discount online sales.

He’d led the firm’s more than 1,580 employees from its Peace Coliseum headquarters in Midvale for about seven months when the pandemic started blowing sales skyward. Johnson likened April, May and June to the peak shopping days of Black Friday and Cyber Monday in a sustained onslaught.

“Those are days we prepare for weeks and months in advance,” the CEO said. “These just came.”

The firm struggled to meet an initial explosion in new orders, he said. Inventories plunged and some deliveries lagged as all but a few employees also switched overnight to work from home. UPS and FedEx even stopped scanning barcodes on Overstock packages off and on in their haste, leaving customers unable to track deliveries, Johnson said.

Blood pressures spiked, he said, “but there was also a certain enthusiasm and almost giddiness as we saw phenomenal sales day after phenomenal sales day.”

Johnson said Wednesday that Overstock expects the dramatic uptick to continue well into fall and winter as those buying habits solidify and customers move back indoors and into a “cozy” phase of upgrades to their home decor.

Almost a year to the day that Byrne “dropped the mic,” as Johnson put it, “the market has recognized the success we’ve made and our stock has done well.”

“It’s an exciting time to be working at Overstock,” he said.