The price of our stock may be vulnerable to manipulation.
We
filed an unfair business practice lawsuit against Morgan
Stanley & Co. Incorporated, Goldman Sachs & Co., Bear Stearns
Companies, Inc., Bank of America Securities LLC, Bank of New York,
Citigroup Inc., Credit Suisse (USA) Inc., Deutsche Bank
Securities, Inc., Merrill Lynch, Pierce, Fenner & Smith, Inc., and
UBS Financial Services, Inc., and settled the case with respect to all
defendants except Goldman Sachs Group, Inc., Goldman Sachs & Co.,
Goldman Sachs Execution & Clearing L.P.; Merrill Lynch, Pierce,
Fenner & Smith, Inc., and Merrill Lynch Professional Clearing
Corporation. In January 2012, the trial court granted the remaining
defendants’ motion for summary judgment. We have appealed the ruling.
We
believe these remaining defendants engaged in unlawful actions and have
caused substantial harm to Overstock, and that certain of the
defendants have made efforts to drive the market price of Overstock’s
common stock down. To the extent that the defendants or other persons
engage in any such actions or take any other actions to interfere with
or destroy or harm Overstock’s existing and/or prospective business
relationships with its suppliers, bankers, customers, lenders,
investors, prospective investors or others, our business, prospects,
financial condition and results of operation could be harmed, and the
price of our common stock may be more volatile than it might otherwise
be and/or may trade at prices below those that might prevail in the
absence of any such efforts. The practice of “abusive naked short
selling” continues to place our stock at risk for manipulative attacks
by large investment pools and prime brokers.
Abusive
naked short selling is the practice by which short sellers place large
short sell orders for shares without first borrowing the shares to be
sold, or without having first adequately located such shares and
arranged for a firm contract to borrow such shares prior to the delivery
date set to close the sale. While selling broker dealers are by
rule required to deliver shares to close a transaction by a certain
date, and while purchasing broker-dealers are obligated by rule to
purchase the sold quantity of shares when they are not delivered to
close the sale, these rules are often ignored. Abusive naked short
selling has a depressive effect on share prices when it is allowed to
persist because the economic effect of abusive naked short selling is
the oversupply of counterfeit stock to the market. We believe the
regulations designed to address this abusive practice are both
inadequately structured and inadequately enforced. Consequently, we
believe that without the enactment of adequate regulations and the
enforcement necessary to curb these abuses, the manipulations achieved
through abusive naked short selling are likely to continue. We believe
that our stock has been subject to these abusive practices by those
attempting to manipulate its price downward. To the extent that our
stock is subject to these practices in the future, our stock may be more
volatile than it might otherwise be and/or may trade at prices below
those that might prevail in the absence of such abuses.