The sudden resignation of Overstock.com Inc. founder and Chief Executive Patrick Byrne takes away a major distraction, but doesn’t solve any issues for the questionable company.
Byrne announced his resignation Tuesday morning, a week after he told the world in a corporate news release that he had an affair with a Russian spy and had provided important information to the “men in black” in Washington. Consistent with that spy drama, Byrne wrapped up his time at Overstock with a lengthy interview in Forbes, in which he sounded like a character on the lam in a film noir.
“I will be sitting on a beach in South America shortly, and that is all I want to think about,” he told Forbes in a call from his car, after delivering a farewell speech to his surprised employees. Byrne told the reporter he had his bags packed. “I want to focus on getting back into good shape, doing yoga and becoming a vegetarian.”
An escape to South America and a focus on getting in shape sounds like the plans of a future fugitive from justice, not a chief executive. So this is a good time to mention that Overstock is in the middle of an apparently expanding Securities and Exchange Commission investigation. And that is just one of the issues that should temper any optimism Overstock investors should feel as Byrne takes his leave. But the latest chapter in the saga of Overstock OSTK, +8.31% led to its shares soaring 8% on Thursday after the news of Byrne’s resignation, after they plummeted last week.
In a lengthy 16-minute interview on Fox Business’s “Bulls and Bears,” Byrne said he is leaving Overstock in a “perfect place” and said that he is “not getting chased out” of his company. He said he came forward with information about political espionage against Hillary Clinton, Marco Rubio, Ted Cruz and Donald Trump because he felt it was his duty as an American, and that it had nothing to do with Overstock. “I have been warned that the apparatus of Washington is going to grind me into dust and that’s going to happen, and I have to get that away from the company.”
Byrne did not mention any plans to go to South America to Fox. But if indeed he is sitting on a beach, forgetting about Overstock’s problems, the remaining company executives and investors are left holding the shopping bag, so to speak. Regarding the SEC investigation, Overstock disclosed this month that it had received a follow-up request from the SEC in its investigation into its tZero blockchain business and its crypto token offering.
Financially, Overstock’s most recent quarter showed a 29.2% drop in revenue in the core retail business, and again another quarter went by without selling that business, as Byrne has been trying to do since last year to focus on Overstock’s fledgling, but still money-losing, blockchain efforts. Those efforts appear in part to stem from Byrne’s fascination with the digital currency bitcoin BTCUSD, -0.80% and an obsession with revenge on Wall Street, for which he has no love, after a lengthy legal battle with some of the biggest firms on the street over allegations that they enabled naked short selling. TZero is a digital trading platform that would circumvent traditional trading mechanisms.
If there was any doubt though, that Byrne’s vision remains intact, one obvious clue is that Jonathan Johnson III, the president of Medici Ventures, Overstock’s blockchain arm, was named interim chief executive of Overstock. Overstock’s Chief Algorithms Officer Kamelia Aryafa, who was described as a brilliant machine-learning scientist, replaced Byrne on the board. She was also promoted to executive vice president in the retail business. Johnson is already on the board.
But putting Johnson in charge of the entire company shows that the Overstock board believes the future of the business is with Medici and tZero. Johnson is also reprising a role that he held in 2013, when he was acting CEO, while Byrne took a leave of absence for medical reasons. He was also the president of Overstock for five years.
“I am confident Overstock’s future — both in retail and blockchain — is bright,” Johnson said in the company’s news release Thursday.
On Monday, Overstock will host a conference call for investors, where perhaps some answers will come as to whether Byrne’s complete vision of Overstock will be continued, or what, if anything will happen with the core retail business, which has been hurt by tougher competition from its money-losing rival Wayfair. W, +1.83% . In his Fox interview, Byrne said that once he stopped focusing on “chasing the monsters who lose $3 billion,” Overstock became profitable again on an EBITDA basis.
So whether Byrne is escaping Washington because of a political spy plot or an expanded SEC investigation, it’s not completely clear. But investors can be sure that Overstock’s remaining executives are now left to determine whether Bryne’s vision is genius and worth their continued pursuit, or a bunch of impossible ideas that will blow up in the wake of his abrupt departure.
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