Overstock.com Inc. Class Action Lawsuit
- Company Name
- Overstock.com Inc.
- Stock Symbol
- Class Period
- May 9, 2019 to September 23, 2019
- Motion Deadline
- November 26, 2019
- District of Utah
On September 27, 2019, the Overstock.com Inc. class action lawsuit was filed charging Overstock and certain of its officers with violations of the Securities Exchange Act of 1934. The Overstock class action lawsuit was commenced in the District of Utah on behalf of purchasers of Overstock securities between May 9, 2019 and September 23, 2019 (the “Class Period”) and is captioned Ha v. Overstock.com Inc., No. 2:19-cv-00709.
Overstock is an online retailer of furniture, home décor, and other products that recently shifted its focus to include the development and commercialization of the financial applications of blockchain cryptocurrency technologies through its tZERO platform.
The Overstock class action lawsuit alleges that during the Class Period, defendants represented that improvements in Overstock’s retail division would fund the launch of tZERO and issued a series of press releases and made statements in U.S. Securities and Exchange Commission (“SEC”) filings and during conference calls that promoted Overstock’s transition to a cryptocurrency exchange service provider, extolling the benefits this would have for investors. Defendants failed to disclose, however, the extreme risks and foreseeable volatility that was likely to result if and when defendants’ true intentions behind the launch of tZERO became known and that Overstock’s retail division would be unable to fund tZERO.
According to the Overstock class action lawsuit, defendants had engineered a digital dividend for Overstock shareholders in which they would receive one share of Series A-1 Preferred Stock for every 10 shares of Overstock common stock, but in order to receive the dividend they would have to set up an account to access an alternative trading system called PRO Securities that was operated by tZERO. The Overstock class action lawsuit alleges that the digital dividend was a scheme by Overstock’s controversial founder, Patric Byrne, to exact revenge upon short sellers, who he had been fighting with for years, before he left Overstock. Because the digital dividend would not be registered and could not be resold for at least six months, it would result in the inability of short sellers to deliver the security upon the surrender of their shares. Since Overstock was heavily shorted during the Class Period, and because short sellers are responsible for any dividends issued during the time when those sellers have borrowed shares, the inability to obtain the locked up digital dividend would make it impossible for short sellers to maintain their positions.
During the period when defendants were executing this short squeeze, and as shares of Overstock spiked to nearly $27 per share in advance of the expected digital dividend, investment banks began to make it known they would accept cash in lieu of the crypto dividend. This had the effect of ending the short squeeze. In addition, on September 18, 2019, Overstock announced it would modify the terms of the dividend to eliminate the lock-up period. On this news, the price of Overstock shares fell to as low as $15.50 per share. Then on September 23, 2019, following many months of media reports on the bizarre behavior of Byrne, who had resigned as Chief Executive Officer in August 2019 and had subsequently sold over $91 million worth of Overstock shares in a three-day sales binge, Overstock belatedly disclosed the sudden and unexpected departure of Chief Financial Officer Gregory J. Iverson and that Overstock would lower guidance to break even EBITDA for the year, eliminating the guidance of $17.5 million in EBITDA that Overstock had recently provided and that was critical to support the launch of its tZERO service. Following this news, the price of Overstock shares fell almost 50% to close at $11.19 per share on September 23, 2019.
The Private Securities Litigation Reform Act of 1995 permits any investor who purchased Overstock securities during the Class Period to seek appointment as lead plaintiff in the Overstock class action lawsuit. A lead plaintiff will act on behalf of all other class members in directing the Overstock class action lawsuit. The lead plaintiff can select a law firm of its choice to litigate the Overstock class action lawsuit. An investor’s ability to share in any potential future recovery of the Overstock class action lawsuit is not dependent upon serving as lead plaintiff. If you wish to serve as lead plaintiff of the Overstock class action lawsuit or have questions concerning your rights regarding the Overstock class action lawsuit, please provide your information here or contact counsel, Brian E. Cochran of Robbins Geller at 800/449-4900 or 619/231-1058, or via e-mail at firstname.lastname@example.org. Lead plaintiff motions for the Overstock class action lawsuit must be filed with the court no later than November 26, 2019.
Robbins Geller Rudman & Dowd LLP is one of the world’s leading law firms representing investors in securities class action litigation. With 200 lawyers in 9 offices, Robbins Geller has obtained many of the largest securities class action recoveries in history. For six consecutive years, ISS Securities Class Action Services has ranked the Firm in its annual SCAS Top 50 Report as one of the top law firms in the world in both amount recovered for shareholders and total number of class action settlements. Robbins Geller attorneys have helped shape the securities laws and have recovered tens of billions of dollars on behalf of aggrieved victims. Beyond securing financial recoveries for defrauded investors, Robbins Geller also specializes in implementing corporate governance reforms, helping to improve the financial markets for investors worldwide. Robbins Geller attorneys are consistently recognized by courts, professional organizations and the media as leading lawyers in the industry.