Overstock Short Sellers Fall Short as Judge Gives Digital Dividend Claims Short Shrift
Overstock.com and its former leader Patrick Byrne have prevailed over the dividend-doubting short sellers who cried foul (and filed suit) over the e-commerce site’s issuance of a digital security.
- On Tuesday, U.S. District Judge Dale A. Kimball tossed the federal class action first filed last September by short sellers who claimed they’d been hosed by Byrne.
- The suit had been challenged by defendants as “meritless” when they called for its dismissal in May.
- Plaintiffs accused Overstock of fraudulently pumping its stock with misleading financial projections and by promising to issue a digital dividend to shareholders via its tZERO subsidiary, an alternative trading system for digital securities.
- That digital security’s originally planned six month lockup would have put the squeeze on short sellers unable to cover their positions. In their original filing in U.S. District Court, plaintiffs called it a “secret plot” by Byrne to exact “revenge” on short sellers
- But if the plot was one for revenge, then it was hardly a secret: Judge Kimball said the digital dividend’s “broad media coverage” undercuts plaintiff’s claims that Byrne or Overstock “deceived anyone,” according to Law360.
- While Byrne’s very public hatred of short sellers is rivaled perhaps only by Elon Musk, Judge Kimball said that’s neither here nor there, because Overstock had a “legitimate business purpose” for issuing its digital security.
- “Overstock was trying to transition from being a traditional online retailer to a blockchain technology business. The dividend was a creative way to strengthen that transition,” Judge Kimball said.
