Overstock CEO Patrick M. Byrne Resigns
August 22 2019 - 12:00PM
Overstock.com, Inc. (NASDAQ:OSTK) releases the following
letter to shareholders from founder and CEO Patrick M. Byrne:
Dear Shareholders,
In July I came forward to a small set of journalists regarding
my involvement in certain government matters. Doing so was not my
first choice, but I was reminded of the damage done to our nation
for three years and felt my duty as a citizen precluded me from
staying silent any longer. So, I came forward in as carefully and
well-managed fashion as I could. The news that I shared is bubbling
(however haphazardly) into the public. Though patriotic Americans
are writing me in support, my presence may affect and complicate
all manner of business relationships, from insurability to
strategic discussions regarding our retail business. Thus, while I
believe that I did what was necessary for the good of the country,
for the good of the firm, I am in the sad position of having to
sever ties with Overstock, both as CEO and board member, effective
Thursday August 22.
This possibility or even likelihood has been forefront of my
mind for just over a year, since certain news became public in July
2018. On July 15 of this year, in the expectation that I might be
gone before our recent (August 8) earnings call, I wrote my most
detailed letter to shareholders in a long time (“Overstock.com
Releases Letter to Shareholders from CEO Patrick M. Byrne”). Here
are the key points from that letter that you should know as a
shareholder:
- I think the blockchain revolution will reshape key social
institutions. We have designed and breathed life into perhaps the
most significant blockchain keiretsu in the world, a network of
blockchain firms seeking to revolutionize identity, land governance
(= rule of law = potential = capital), central banking, capital
markets, supply chains, and voting. In three of those fields (land
governance, central banking, and capital markets) the word
“trillions” comes up when calculating the disruptive opportunity of
blockchain. In those three fields, our blockchain progeny (Medici
Land Governance, Bitt, and tZERO, respectively) are arguably the
leading blockchain disruptors in existence.
- Retail
- We face a competitor who (by the end of this year) will have
lost close to $3 billion, and who announced recently it will seek
to raise another $750 million, and who will be able to cover its
expenses when the two lines in the graph intersect (cf. below
right).
- After my ill-fated experiment last year in copying our
competition’s strategy, our retail business has recovered to a
state of positive adjusted EBITDA (cf. graph on left).A Media
Snippet accompanying this announcement is available by clicking on
the image or link below:
- Leadership – We have the most solid Retail leadership team we
have ever had. Our ab initio redesign of our executive structure
starting a year ago has led to a better integration of all
functions and proper management thereof than we have ever achieved
in our history.
- Chief Marketing Officer JP Knab is the greatest master of
Digital Marketing I have ever met. I will miss watching Commander
Data find new arbitrage.
- Kamelia Aryfar is a data scientist and Machine Learning
specialist of some renown: Dr. Aryfar originally cut her teeth at
Etsy, and in her two years with us has led the Machine Learning
overhaul of our company, (through which we are 40% complete).
- The integration of Skynet (Kamelia’s name for her AI creation)
continues across Marketing and Sourcing, and as it augments
decisioning, we discover ways to find continuous gains.
- In recognition of the importance that Machine Learning is
coming to play in our world, Kamelia has been named Executive Vice
President and has also been appointed to the company’s board of
directors. She is an extraordinary asset to the firm and she will
do big things for you shareholders in the future.
- Dave Nielsen is one of the few OG retailers I ever met who made
the prop-to-jet conversion. He is as able as they come and is
widely admired within the firm. He has already been serving
as President and has been a big part of our radical improvement in
bottom line this year. He is a true adult. He knows the mission is
to continue providing the space and resources for Kamelia, JP and
others to keep bringing in those multi-tens of million-dollar
improvements in Retail bottom line by focusing on making our Retail
site a gem technologically and leave the multi-billion losses to
others.
- Over the last three years, Jonathan Johnson has done an
extraordinary job of converting a mishmash of entrepreneurs, term
papers, and your capital, into the most remarkable keiretsu of
well-formed blockchain firms in the world. He has proven himself to
be an extremely capable partner who gets the vision. I welcome that
he will be serving as CEO of your entire public company. You could
not have a more stable, prudent leader. The reason we have been
such good partners is that Jonathan is the exact opposite of me in
many respects. No doubt that may be welcome in some quarters.
He has the keiretsu, he has the roadmap, he understands that the
goal is to nurture the keiretsu to its full potential while
permitting the Retail business to focus all its efforts on
technological perfection rather than loss accumulation.
- Strategically:
- We have removed the pistol from our temple. I believe in the
near future the cash generated by Retail going forward should be
adequate for funding both Retail’s ongoing innovation (we caught
the Machine Learning wave just right here, and have a first-rate
team that is reinventing the company from an ML perspective), and
nurturing to maturity our keiretsu of blockchain firms, especially
tZERO, Medici Land Governance, and Bitt (well, and Voatz, too) –
particularly with the possibility of their becoming less of a cash
burn, either through outside investments, or from the fact that
their products (e.g., tZERO’s) are reaching the market.
- Retail:
- In the course of discussions with brick-and-mortars last year,
when we filled out their models with our data, we would generally
discover that if we were part of a brick-and-mortar chain with a
national footprint there could be ≈$200 million in annual savings
(primarily but not exclusively in logistics). On the other hand, if
joined to certain sites with high traffic but which have not
cracked the monetization nut, models showed that, combined with us,
there might be savings of ≈$150 - $200 million.
- In the absence of some such hybridization, I think that just by
continuing to get supply-chain-smarter we can find ≈$40 million of
those savings on our own over 12-18 months. We have introduced
Advertising Technology this summer which will generate (I believe)
a similarly attractive number over the same time frame. So,
assuming Retail does $115 - $120 million better on the bottom line
this year than last (our range of estimates), expecting it next
year to make multiple tens of millions of dollars in bottom line
improvements again seems reasonable to me.
- As you know, I do think that the Gods of Economics believe some
such hybridization of business models is to be done. That could
take many forms, from cooperative partnerships with a
brick-and-mortar, to an acquisition (for a fund with ambition, the
ultimate form might be a stack of all three layers and a recovery
of perhaps ≈$300 million in bottom line while establishing
something unique).
- Collectively - The best thing to do for shareholder interest is
to use cash flow to mature our blockchain keiretsu firms to
fruition while we keep running our Retail business focusing
on refining it as an exquisite gem of a technology
platform, rather than again trying to go head-to-head with
any firm in the process of dropping billions of dollars in losses.
Refining that technological gem is what brings value to
brick-and-mortars for whom we represent a way to leap to the front
of the pack technologically. If the right strategic offer is made
that reflects the value of that technological gem, I am confident
the board will consider it. It is possible that my absence will
advance the possibility.
- On any normal day, my presence is not conducive to strategic
discussions regarding our retail business. I believe that going
forward my presence will definitely not be conducive to such
strategic discussions. And if the hors d’oeuvre that was served
recently caused the market such indigestion, it is not going to be
in shareholder interest for me to be around if and when any main
course is served.
It has been an honor to serve you through thick and thin,
threats grand and arcane, for the past 20 years. You own some
disruptive assets herein. One of them changed how furniture gets
purchased in the United States and has run up a record of GAAP
profitable years that is nearly unrivaled in B2C eCommerce, on a
fraction of the capital of every competitor they ever faced (a fact
missed by most). And you own blockchain assets that seem poised to
revolutionize capital markets, finance, and governance for the
poor. It has been 20 years of remarkable innovation from a team
that is now honed for it.
Coming forward publicly about my involvement in other matters
was hardly my first choice. But for three years I have watched my
country pull itself apart while I knew many answers, and I set my
red line at seeing civil violence breaking out. My Rabbi made me
see that “coming forward” meant telling the public (not just the
government) the truth. I now plan on leaving things to the esteemed
Department of Justice (which I have doubtless already angered
enough by going public) and disappearing for some time.
I wish all shareholders a smooth and level road… And don’t
forget to shop Overstock.com!
Your humble servant,Patrick M. Byrne
About Overstock.com
Overstock.com, Inc Common Shares (NASDAQ:OSTK) / Digital
Voting Series A-1 Preferred Stock (Medici Ventures’ tZERO
platform:OSTKO) / Series B Preferred (OTCQX:OSTBP) is an
online retailer and technology company based in Salt Lake City,
Utah. Its leading e-commerce website sells a broad range of new
products at low prices, including furniture, décor, rugs, bedding,
home improvement, and more. The online shopping site, which is
visited by nearly 40 million customers a month, also features a
marketplace providing customers access to millions of products from
third-party sellers. Overstock was the first major retailer to
accept cryptocurrency in 2014, and in the same year founded Medici
Ventures, its wholly-owned subsidiary developing and accelerating
blockchain technologies to democratize capital, eliminate
middlemen, and re-humanize commerce. Overstock regularly posts
information about the company and other related matters on
the Newsroom and Investor Relations pages on
its website, Overstock.com.
O, Overstock.com, O.com, Club O, Main Street
Revolution, and Worldstock are registered trademarks of
Overstock.com, Inc. O.biz and Space Shift are also
trademarks of Overstock.com, Inc. Other service marks, trademarks
and trade names which may be referred to herein are the
property of their respective owners.
This press release contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Such
forward-looking statements include all statements other than
statements of historical fact. Additional information regarding
factors that could materially affect results and the accuracy of
the forward-looking statements contained herein may be found in the
Company's Form 10-Q for the quarter ended June 30, 2019, which was
filed with the SEC on August 8, 2019, and any subsequent filings
with the SEC.
SOURCE: Overstock.com, Inc.
Media Contact:pr@overstock.com
Investor Contact:ir@overstock.com
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