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 Tesla's 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.