Author Topic: OSTK - Overstock.com  (Read 144664 times)

spark411

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Re: OSTK - Overstock.com
« Reply #330 on: November 24, 2017, 09:49:55 PM »
Good points.  I've been a big bull on this stock for the past few years and thus may have several biases.

I'm looking for folks to refute my case so I can see what I'm missing.    I do not think I'm cherry picking the comps.  If anyone can show an internet business transaction over $500M that was below 1x revenue, please post so that we can all learn.

I do not think past EBITDA is a good measure to value OSTK for the following reasons   A)  the market does not seem to value the stocks based on EBITDA  B)  OSTK has very conservative accounting practices i.e. marketing costs are expensed vs. capitalized.  This supresses EBITDA relative to it's peers  C) There is a lot of noise in the past EBITDA numbers. For example, legal costs related to naked short selling is an offensive expense that is not recurring.    Another example is that investments for T0/Medici are burdened by the internet business.   A buyer would not factor those costs in the proforma EBITDA calculations D) recent EBITDA is lower b/c of changes in Google's algorithm.     Changes in Google's algorithm occurs every few quarters and is just part of the business.  EBITDA should be normalized for the dips.   E)  Wayfair is acting irrationally and that's causing OSTK sales and EBITDA to suffer.  I think this is the one I'm most worried about. It's unclear how long this will occur.
   


SnarkyPuppy

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Re: OSTK - Overstock.com
« Reply #331 on: November 25, 2017, 06:42:06 AM »
Good points.  I've been a big bull on this stock for the past few years and thus may have several biases.

I'm looking for folks to refute my case so I can see what I'm missing.    I do not think I'm cherry picking the comps.  If anyone can show an internet business transaction over $500M that was below 1x revenue, please post so that we can all learn.

I do not think past EBITDA is a good measure to value OSTK for the following reasons   A)  the market does not seem to value the stocks based on EBITDA  B)  OSTK has very conservative accounting practices i.e. marketing costs are expensed vs. capitalized.  This supresses EBITDA relative to it's peers  C) There is a lot of noise in the past EBITDA numbers. For example, legal costs related to naked short selling is an offensive expense that is not recurring.    Another example is that investments for T0/Medici are burdened by the internet business.   A buyer would not factor those costs in the proforma EBITDA calculations D) recent EBITDA is lower b/c of changes in Google's algorithm.     Changes in Google's algorithm occurs every few quarters and is just part of the business.  EBITDA should be normalized for the dips.   E)  Wayfair is acting irrationally and that's causing OSTK sales and EBITDA to suffer.  I think this is the one I'm most worried about. It's unclear how long this will occur.
 

I think you're looking at it from an angle that really wants this to do well.   Objectivity is important.    If your thesis is predicated on internet businesses being worth > 1x revenue if < $500mm market capitalization,  there are a lot of better opportunities for you to find in the microcap space.    In response to your direct points:

A-  Market will value the business on a DCF of its future cash flows.  Revenue multiples are only a very small part of the picture.    Two companies with the exact same revenue should trade at very different revenue multiples given quality of revenue, recurring nature of revenue, operating and fcf margins, competitive advantage, business and industry outlook, etc.   
B-  Marketing costs not being capitalized is conservative?   
C-  The t0/medici business doesn't make money.   At ~$40 per share you could argue that you were purchasing the securities lending blockchain for free/very cheap given certain assumptions in the "free money" ICO.   At $64 per share, you're speculating on this portion of the business.   
D-  What is OSTK's normalized EBITDA?  And why are you not subtracting out capital expenditures required to maintain the business?   
E-  Not sure what this means.

At $64 you're basically guessing on 1/3 of the business.    Not saying it won't double or triple, but you're absolutely paying for some success in t0/Medici.   

Personally-  I think Byrne recognized an opportunity to ride the waves of blockchain hype into a sale of the business.   This may work out.     
« Last Edit: November 25, 2017, 06:43:50 AM by SnarkyPuppy »

spark411

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Re: OSTK - Overstock.com
« Reply #332 on: November 25, 2017, 07:33:48 AM »
Very good points.  In fact, I've been selectively selling OSTK for a microcap type of stock.   Other opportunities exist that have similar upside from this point but less downside risk--I think downside is 50%.  Even though I'm optimistic, the risk/reward does not outweigh other opportunities available.  The interesting fact is that there are two catalysts about brewing in the next 4-6 weeks and the question is do you sell before the events or afterwards.   Two events are:  Potential sale of online business and ICO early December.   Learning a lot about the challenges of investing.   

aws

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Re: OSTK - Overstock.com
« Reply #333 on: November 25, 2017, 11:06:17 AM »
Don't forget to factor in the dilution from the warrant transactions earlier this month.  There will be 3,722,188 new shares issued at 40.45 per share early next year.  Combined with the warrant sales proceeds the company will received $157 million in new cash, but those new shares will represent a 13% ownership of the new company, so for every 1% you had before you will only have 0.87% ownership.

All other things being equal, this has a pretty significant effect on the share price.  The funds that bought the warrants have made a profit of about $85 million so far on a $6.6 million investment (which was a no-brainer for the funds as I think the warrant cost was set to something like 1/3rd of the black-sholes warrant value), or about $23 per share after exercised.  In theory that $85 million is like a transfer of wealth from the existing shareholders, who would have held a greater ownership interest, to the option holders.  With about 25 million shares outstanding before the deal that's a $3.42 reduction per share compared to what the shares should be worth without the sweetheart deal given to those funds.  However, I'm sure the hype created by getting those big names involved resulted in much more of a gain than the wealth transfer lost, but if you're valuing it on a long-term basis that shouldn't really matter.

By the way, does anyone know for sure how the accounting of these warrants will be done for Q4?  My recollection of the accounting rules is that they will need to revalue them based on market value at 12/31/17 and record a loss equal to the difference, which as I said is currently an $85 million loss.  It's just a paper transaction, but that could lead to an ugly headline EPS figure if people aren't prepared for it.


Sharad

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Re: OSTK - Overstock.com
« Reply #334 on: November 29, 2017, 09:07:27 AM »
Crazy good.    Listen to the last 2 minutes.   Clearly state catalyst.   Will be interesting to see how much higher it goes.   I think the market cap equaling the total revenues is reasonable.  Thoughts?

https://www.youtube.com/watch?v=Y9XWghQb20k

I just sold half of my shares last week so I expect the stock to at least triple from here.  If there is one thing I do consistently it is sell way too early.

i'm having the same issue.   I keep selling 10% of shares at certain weight of portfolio but after I sell it keeps going up.   I'm reminded how hard it is to hold onto a stock like buffett and get the large returns.    At 1x sale we're looking at 1.8B which means about 20% above today's price.    using pabrai's 90% of intrinsic value method, it should mean i should sell at 10% of today's stock price.   very hard to decide what to do.   the target prices assumes no value on the t0 stuff.  hold like buffett or sell like pabrai?

Explain to me why you two are crying over this...after making such wonderful investments and enjoying terrific returns?  The glass is half-full, not half-empty.  Sell if you can't sleep...hold if you can sleep.  Cheers!

Iím not crying. Thatís why I held onto half of my shares so that I can sleep either way it goes.

This reaction to selling and seeing a stock shoot higher reminds me of the dot-com boom and bubble. Rather than say anything negative to that, I'd like to congratulate you folks for having the discipline to sell in a parabolic move (ignoring OSTK for a moment, and consider the move of cryptocurrency; regardless of it will become the cornerstone medium of exchange in the future, the move is unsustainable in the long run, and companies piggybacking its move cannot go up forever). It's one of the most difficult things to do as an investor.

Hat tip to your big victory. May you have many more in the future!
"If we are not able to ask skeptical questions, to interrogate those who tell us that something is true, to be skeptical of those in authority, then we are up for grabs for the next charlatan - political or religious - who comes ambling along."
- Carl Sagan

spark411

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KinAlberta

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Re: OSTK - Overstock.com
« Reply #336 on: December 13, 2017, 12:29:28 PM »
Congrats to those still in this!

We bought tons in May and August...in fact, it was going to be double the size of any of our positions, but the order in August was only 1/5th filled!  :(

We have not sold any...fair value is in the $37-45 range, especially if they spin-off the blockchain business...that's about $10-13 by itself in this market, and Overstock retail is about $27-35.

Cheers!

Many years back I owned OSTK only to come back in a year or so ago after sitting out for maybe a decade. However, I bought small and pared it back in early 2017 and kept a small position until recently when I doubled it. So, it's still miniscule.

That said, I'm really curious about your reasoning in trying to as you said: "going to be double the size of any of our positions".


Now that there's talk of taking it private, I see the management in a new light. It shows a willingness either one, pump one's stock when proper financial reporting fails, or two, to thoroughly screw over existing, possibly very long term minority shareholders - usually at a price well below intrinsic value as estimated by those most able to determine it - the insiders themselves. No easier way to transfer wealth from your partners to yourself. (Wealth being not just the current value but the fact that it exists at all.)

Note: as someone that traded in and out - I had no long term loyalty but I'm sure there would be others that have likely stuck with it for many many years.


Given the possible sale, blockchain expansion, etc. I'm even more curious now about what you are thinking about actual valuations, and any other thoughts you might be willing to share. It would be refreshing compared to the useless speculative potential type of information we get from uncritical media seeking clicks. For example:



Regularly the vested, self-serving interests (aka stock promoters) typically say that whatever they are promoting "can double from here".  Then when/if the stock starts to move they suddenly and predictably up their forecasts to 5 to 10 times.  Here we have roughly 8X:



Quote
Overstock.com shares spike after blockchain unit announces for-profit property registry
Overstock.com shares briefly rise 8.79 percent to $58.15 a share after CEO Patrick Byrne announces a joint venture for a global property registry based on the blockchain technology behind bitcoin and other digital currencies.
The for-profit venture is in partnership with well-known Peruvian economist Hernando de Soto, who has argued that formal documentation of land ownership is the key to alleviating poverty in underdeveloped countries.
Independent investor Marc Cohodes thinks if Byrne can deliver on his blockchain investments, Overstock shares are worth between $200 and $400 each.
Evelyn Cheng   | @chengevelyn
Published 3 Hours Ago  Updated 1 Hour Ago


..."If [Byrne] executes properly on blockchain I think the stock's worth somewhere between $200 and $400," said Marc Cohodes, a noted short seller and independent investor who turned positive on Overstock.com in October. "I own a lot of this thing. I bought a lot more the other day when it pulled back."


https://www.cnbc.com/2017/12/13/overstock-com-spikes-after-blockchain-unit-announces-for-profit-property-registry.html
« Last Edit: December 13, 2017, 12:32:14 PM by KinAlberta »

mwtorock

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Re: OSTK - Overstock.com
« Reply #337 on: December 15, 2017, 03:05:36 PM »
this is getting into the zone for the amzn/nflx investors. you have to be comfortable valuing high uncertainty high potential situations. a couple of guys i talked with that got into ostk this year both looking at not the valuation but the potential.

my estimation of the retail business was $600m a couple of years ago, but they might be able to sell it for more with a strategic buyer. at current market cap, i guess it is not cheap unless you have high confidence in the potential of blockchain businesses. i still feel 20%-30% upside in the short term on catalysts - coin offering and the sale of retail business. at the moment i dont think i will be a holder after the events.


DanielGMask

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Re: OSTK - Overstock.com
« Reply #338 on: January 01, 2018, 07:04:08 PM »
Sam Antar, former CFO of Crazy Eddie says Overstock shares are highly manipulated.

https://whitecollarfraud.blogspot.com/2017/12/thanks-to-marc-cohodes-were-back-to-bad.html
You should follow me on twitter @ManSalceda

Green King

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Re: OSTK - Overstock.com
« Reply #339 on: January 01, 2018, 10:58:15 PM »
Sam Antar, former CFO of Crazy Eddie says Overstock shares are highly manipulated.

https://whitecollarfraud.blogspot.com/2017/12/thanks-to-marc-cohodes-were-back-to-bad.html

Lolz, where is the data?
GK