Overstock CEO Patrick Byrne on Friday published a combative letter to shareholders defending his sale of some 900,000 shares in the company.
Byrne has faced criticism in the days following his move, which he said was necessary in order to complement his meager (for a CEO) $100,000 salary and "fund a variety of projects," including the company's blockchain business and various charity works.
He said that his plans to sell shares has been public for a year but that he couldn't previously make any sale because of insider information that he says would have been illegal under Securities and Exchange Commission rules.
Byrne's letter is long and somewhat rambling, written in his signature colorful and obdurate style.
"Apparently, some find it unsettling and demand answers from me about why, after 20 years of working (generally without salary or compensation), I might sell several tens of millions of dollars' worth of stock. Frankly, I had no idea that shareholders would demand explanations of why and how I might want to use my cash derived from my labor and my property to pursue my ends in life," he wrote. "Not once have I ever asked a shareholder for his reasons in any decision he made. Yet, given the consternation this has caused, I will give answer, to preclude further recurrence of mass vapors."
He is adamant that selling his shares couldn't have been made any other way. "As to the timing: since I informed the public of my plans a year ago, there has barely been a day where my selling of stock would have been appropriate and legal," he wrote. "On nearly every one of those days I have been in possession of information that would have made such a sale inappropriate (or at least, arguably inappropriate)."
A director, officer or employee of a company can make pre-scheduled trades of a specified number of shares on pre-selected dates or through a blind trust, under the SEC's rule 10b5-1, and that would presumably apply to a predicament like Bryne's, where an executive knows he or she wants to sell shares but doesn't want a sale to be made with the help of information that insiders are privy to but the public and regulators are not. But Byrne claims that doesn't apply to his situation.
"Nor could I sign a 10b5 plan, when such signature can only be made when one is not in a position of having asymmetric information with the marketplace," he said. "Only briefly, last fall, for about a week, did I feel I was not in possession of material non-public information. Recently I made a tremendous effort to disclose all possibly relevant information in our earnings release and our shareholder meeting (the latter of which has been overlooked), so that after the meeting, come what may, I could conduct such sales."
Byrne has long held a keen interest in blockchain technology, even before Overstock itself got into the business. The company began accepting crypto-currency as payment in 2014 and more recently established its blockchain trading platform subsidiary tZERO. In 2017, Byrne said he was seeking to sell the company's e-commerce business to an entity that would run it or take it private, in order to raise money to fund some of his blockchain-related efforts. That hope was still alive a year ago, but executives earlier this month said that Overstock's e-commerce business is just now attracting suitors thanks to a comeback predicated on expense cuts.
The company's first quarter total net revenue fell 17% to $367.7 million as gross profit declined 22% to $73.1 million and gross margin shrank to 19.9% from 21.1%. Still, Byrne said Friday that he was loathe to sell now "while the business continues to rebound quickly" and that he is "as optimistic as ever about the future."
He ended the letter by stating it is the last he will comment on the matter. "I do not intend to ever give such an explanation again," he said. "I owe shareholders staying within the law and not making decisions based on inside information, not explanations of my life and projects outside Overstock."