Patrick M. Byrne

Patrick M. Byrne is President and CEO of internet retailer Overstock.com best known for his "jihad" against Naked short-selling.

Background

Patrick Byrne received a bachelor’s degree from Dartmouth College (Asian Studies & Philosophy), a master’s degree in philosophy from Cambridge University as a Marshall scholar, and a doctorate in philosophy from Stanford University.

Byrne served as Chairman, President and CEO of Centricut, LLC, a manufacturer of industrial torches, then held the same three positions at Fechheimer Brothers, Inc., a Berkshire Hathaway company manufacturing police, firefighter, and military uniforms. Currently Byrne is CEO and President of Utah-based internet retailer Overstock.com.

'Jihad' against naked shorting

In 2005, Byrne contended that a market-wide conspiracy to commit naked short selling was targeting Overstock.com. Short selling is a way for an investor to bet that the share price of a company will decline by borrowing shares from someone else, selling them, buying them back at a future date, and returning the repurchased shares to the lender. If the stock price when the shares are repurchased is lower than the price at which the shares were sold, the investor makes a profit. In naked short selling, the shares are not borrowed prior to the sale. The practice is controversial, and its prevalence is in dispute.

Byrne held a conference call which was widely publicized because of its many allegations, including his contention that a "conspiracy" was targeting his company, frequently describing his company's adversaries as "miscreants," and attributing their actions in part to a shadowy leader he called the "Sith Lord". He told an analyst conference call in August 2005 that the Sith Lord is "a name that everybody on the phone, every single person on the phone would recognize this person's name. He's one of the master criminals from the 1980s, and he's back in business."[1] Byrne has never identified the "Sith Lord." He repeated the conspiracy allegations several times during 2006, contending the markets were "broken." He has likened the conspiracy to Al-Qaeda, saying "There's no office, no headquarters; it's a splintered group that has learned to operate together."[2]

Byrne commenced what he described as a "jihad" against naked short selling and short-sellers whom he described as targeting his company. He filed suit against a hedge fund, Rocker Partners, which he claimed colluded with a securities research firm and the press to drive down the price of his stock. The defendants vigorously denied the charges. He also waged a public campaign against the practice, in the media and Internet.

Besides controversy over what many allege to be unstable behaviour of Byrne, there is a more general debate about whether a CEO should be concerned about naked short selling of the stock of his company. Those less concerned about naked short selling believe that at worst it would cause the price of a company's shares to fall temporarily, allowing investors to buy more shares at the lower price, should they wish to do so. Critics of naked naked short selling believe it hurts shareholders, because the additional supply of shares depresses the market price.

Byrne's campaign against naked short selling has been widely criticized, with New York Times columnist Joseph Nocera saying: "Except for a few fellow-traveling Web sites, where Mr. Byrne is viewed as a heroic figure, most people who understand the issue or have looked into it think it's pretty bogus."[3]

In March 2006, John Byrne, chairman of Overstock.com and father of Patrick Byrne, said that he was thinking of stepping down in disagreement over his son's "jihad" over naked short-selling. This development contributed to the controversy over Byrne's behavior. [4] In April 2006, John Byrne stepped down to become vice-chairman, and was replaced by Patrick Byrne, and in July 2006 he resigned from Overstock's board of directors.

Media attention

Since Byrne launched Overstock.com in 1999, he and his company have garnered attention from numerous national media outlets. Among them are the Wall Street Journal, ABC News with Peter Jennings, Fortune, CBS Marketwatch, and Business Week, among others, and is a frequent guest on Bloomberg TV, CNBC, and Fox News shows (such as Cavuto and Kudlow & Cramer). In 2002, Byrne was named to Business Week’s list of the 25 most influential people in e-Business: the magazine cited survival strength and vision as qualities that qualified Byrne for the list. In 2003 Ernst & Young awarded Byrne an “Entrepreneur of the Year” award in the category of Lifetime Achievement.

More recently, however, he has received critical treatment in the press, largely because of his allegations conerning an alleged naked short-selling conspiracy. He is also criticized for his often sharp attacks on stock research analysts critical of his company, his lawsuit, and his sometimes personal attacks on individual members of the press.

Byrne has asserted that he is under attacks from "dishonest" members of the press, and has singled out journalists at Marketwatch.com, Dow Jones News Service and the New York Post. He has alleged that one reporter is "crooked," and that another receives payments from hedge funds via an ATM.

Byrne's allegations, which his critics deride as bizarre and patently false, have drawn sharp criticism from media outlets as diverse as the Wall Street Journal, New York Times, Fortune and the New York Post.

In a column in the New York Times in March 2006, journalist Joseph Nocera condemned Byrne's attacks on analysts and the press as a "campaign of menace."[5]

Education lobbying

Byrne is head of an education lobbying organization called First Class Education. The organization's primary goal is what they call the "65% solution", which would require 65% of all education spending to be spent on what is considered "in the classroom education". There is a controversy regarding how this category is defined (such as the inclusion of athletics programs and exclusion of libraries and librarians). The plan has been criticized by the National Education Association and other groups. [6] The NEA cites a study by Standard and Poor's, which indicated "no significant positive correlation between the percentage of funds that districts spend on instruction and the percentage of students who score proficient or higher on state reading and math tests." [7] According to First Class Education, 3 states have implemented their plan so far— Colorado, Missouri, and Oklahoma as of July 2006. [8]

Personal life

Byrne has a black belt in tae kwon do and once pursued a career in professional boxing. He is a cancer survivor, and has ridden a bicycle across the country to raise awareness and money for cancer research at the Dana Farber Cancer Institute.

External links

• Overstock.com
• Byrne speech on beating cancer three times
• Fortune Magazine article on short-selling crusade
• New York Times article on Byrne's confrontations with analysts and the media
• First Class Education website
• "The bizarre world of Patrick Byrne's Overstock" - The Register