Patrick Bryne Sells Cryptographic Snake-Oil

Patrick Bryne Performs Media Stunts As Overstock Company Nears Bankruptcy

CEO of Overstock.com Patrick Bryne, is no stranger to media attention. Bryne became known as the Bitcoin messiah by Wired magazine when his company become one of the first major retailers in the United States to accept Bitcoin. The company again made headlines in September announcing international customers could buy with Bitcoin. Yesterday, the company took the Bitcoin media fanfare to the next level by announcing through Wired a “Bitcoin-Like Stock Market”.

You would think with all this recent success, Overstock would be reaping huge benefits from shareholders. However, since the beginning of 2014, Overstock (NASDAQ: OSTK) has lost 46% of its value.

Share Prices Over The Last Year:

July 26, 2013: $34.40

January 1, 2014: $30.79

Today: $16.21

1-Year Overstock Chart

1-Year Overstock Chart

Overstock Is A Failing Business

The market capitalization of Overstock is $397 million dollars. Keep in mind, Amazon’s (NASDAQ: AMZN) market capitalization is $149 billion. Overstock can simply not compete with Amazon, because Amazon has setup a network to offer better prices than Overstock can.

How about other key financial metrics? Overstock has P/E ratio of 4.74, which on first glance would make the company look incredibly cheap. That is until you consider the company is not growing at all, and is closing in on bankruptcy as their core business does not earn much money. Amazon by comparison has a P/E ratio of 846 which would make it look overvalued, unless you understand that Amazon is a growing business.

When Overstock first announced they would be begin accepting Bitcoin, many articles were citing the fact that Overstock did over $1 billion of revenue in 2013. Again, they failed to report that the company net profit was close to zero. A billion dollars of sales did not impress the market either, as the company has disappointed on most earnings reports recently.

Patrick Bryne was hailed by many in the Bitcoin community as heralding a new age of Bitcoin merchant adoption.

Overstock CEO: Patrick Bryne

Overstock CEO: Patrick Bryne

Patrick Bryne Announces Bitcoin Based Stock Market

The Wired story from yesterday gives incredibly favorable coverage to Bryne and Overstock, leading one to believe that Overstock is an emerging technology company. Quoting Wired magazine:

Overstock.com is building software, based on the bitcoin digital currency, that could allow the big-name etailer to issue corporate stock over the internet, sidestepping traditional stock exchanges such as the NASDAQ and the New York Stock Exchange.

 

The Salt Lake City-based company recently hired two of the developers behind CounterParty—an online project that helps individuals and businesses build all sorts of financial services atop the worldwide network of machines that drive bitcoin—and according to Overstock founder and CEO Patrick Byrne, these coders will help build “cryptosecurity” software that any company could potentially use to issue financial securities over the net. Mirroring bitcoin—known as a “crytocurrency”—these securities would be controlled by cryptographic algorithms running across computers spread across the globe, not by a central stock exchange.

Since this announcement, the CounterParty currency has soared over 100%.

CounterParty Chart

CounterParty Chart

And how about the Overstock company? It seems they should have rallied as well, but no they lost 33 cents on the day.

OSTK

OSTK

Patrick Bryne’s megalomania emerges when he suggests that Overstock will soon be worth more than Alibaba:

Like many others, Byrne uses hyperbole in describing the prospects of bitcoin and its related technologies. And he’s committing between five and ten percent of Overstock’s cash flow—”single-digit millions”—to the company’s cryptosecurity project. “Building this—and being the company that owns this—can be more valuable than Overstock,” he says. “It can be more valuable than Alibaba.”

Strangely, the WIRED article never once asks Bryne why his own company is performing so poorly.

In case Bryne is not aware, Alibaba (NASDAQ: BABA) is worth 221 billion dollars. With Bryne’s company pegged at 397 million dollars, he needs to grow his company to be 556 times its current size to be on equal value with Alibaba.

Good luck to you Mr. Patrick Bryne.

Author: Satoshi Nakamoto

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5 Comments

  1. I think Mr. Bryne may see the writing on the wall, The Blockchain has great potential, and he sees it. So what if Overstock’s not doing great, he’ll handle that no doubt. I was lucky enough to meet Patrick Bryne at a Bitcoin Conference in Amsterdam, http://bitcoin2014.com/ , one of the most dynamic CEOs there, so I’m sure he can fix Overstock’s issues.

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    • Why is the core business doing so poorly? His shareholders have lost half their value since the time he came out and said Overstock would accept Bitcoin. He seems to be doing a great service for the Bitcoin community though.

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    • Overstock is reporting earnings tomorrow, do you think it will be a good one?

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