By Jeremy C. Owens, MarketWatch
Patrick Byrne’s dramatic exit from Overstock.com Inc. had a surprise second act Wednesday, as the former chief executive sold his large stake in the company and blamed the Securities and Exchange Commission, which he referred to as “the Deep State’s pets.”
In an SEC filing Wednesday afternoon, Byrne disclosed the disposal of his roughly 4.8 million shares in Overstock shares during the past three trading sessions, with all but 87,000 shares sold on the open market for roughly $90 million. The remainder was given as a gift to an undisclosed recipient.
The longtime chief executive left Overstock in late August after proclaiming in a corporate news release that he had an affair with a convicted Russian agent and had provided important information to the U.S. Justice Department about Russian involvement in U.S. politics. He left behind plans for a “digital dividend” set for next week that could only be accessed through Overstock’s experimental blockchain-based exchange, and required the holder to retain the asset for six months, which many thought to be an attempt to squeeze short sellers, with whom Byrne has frequently battled publicly.
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Overstock /zigman2/quotes/200022359/composite OSTK -2.54% changed those plans on Wednesday, announcing that the dividend would be freely tradable upon distribution, and suggested that the change was due to pressure from the government by stating it was a reaction to “feedback we received from industry participants, investors and regulators.” Overstock also moved back the distribution of the dividend and promised to announce a new record date in three to six weeks.
In a blog post on his “Deep Capture” website, Byrne was more specific about where he thought the pressure was coming from.
“We heard over the weekend that starting last Friday, the Deep State’s pets at the SEC began leaking something to their clients JPMorgan, Morgan Stanley, and Goldman (and here as citizens I bet you thought we were their clients, right? lol),” Byrne wrote in summing up the decision to sell. “They leaked that they were going to Bazoomba our digital dividend,” he said, referencing a joke regarding a poker game that Byrne has used to summarize Wall Street.
“Once that started getting back to me, I realized this: Whenever I have had any question about whether the SEC would or would not do something totally outrageous in order to hurt our company to benefit their clients on Wall Street, they never let me down: they always did the evil thing,” he wrote.
Since February 2018, the SEC has been investigating Overstock’s tZero blockchain subsidiary and its token security offering. In the company’s 10Q filing in May, Overstock disclosed that the SEC had expanded its investigation to include certain public statements made by the company. Overstock has said previously it is cooperating fully with the SEC, but did not immediately respond to requests for comment Wednesday afternoon.
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Byrne said that any suggestion that he sold the shares due to a lack of confidence in the company’s prospects was “wrong,” and said that he would invest almost all the money in gold /zigman2/quotes/210039486/delayed GCZ19 -0.17% , silver /zigman2/quotes/210319343/delayed SIZ19 -0.30% and two unnamed cryptocurrencies as a “hedge” against the economy failing and taking Overstock with it. He promised investors that if that did happen, he would recapitalize the company with his gains from the other investments.
”You will have not just access to capital, you will have access to the friendliest capital imaginable: my own,” he wrote. “I have to wait six months for it to be legal, but anytime after March 17, 2020 I can provide a capital injection if needed by buying back into Overstock. Please remember that as you watch the global chaos.”
Byrne said he also bought into precious metals and crypto to put his money “outside acts of retaliation from the Deep State,” which he promised to “shellac.”
Overstock shares hit a 52-week high last week, but took a big hit as Byrne sold, falling 20.8% Monday, 10.9% Tuesday and 8% on Wednesday. Shares fell more than 3% in after-hours trading Wednesday following the disclosure of Byrne’s stock sales.