Few of the stocks are as fun to watch as Overstock’s OSTK and TravelZoo’s TZOO. The amount of naked shorting that has taken place on these stocks created its own mini-economy, where the stock ups and downs depend not on the company performance or revenue/profit structure, but on the fact that a short wants out or just gets in.
Personally, I think shorting is an excellent way to cool down the overheated stock market, and to make the upper management validate their forward-looking statements, skip the coolaid, and stick to the hard facts. Shorting is a way to tell the company leaders “I do not believe what you’re saying, but here’s your chance to prove me wrong and make money off of me”.
Nevertheless, with OSTK and TZOO the things got a bit out of hand. Look at Yahoo! Finance page for Overstock:
% of Shares Held by All Insider and 5% Owners: 84%
% of Shares Held by Institutional & Mutual Fund Owners: 53%
% of Float Held by Institutional & Mutual Fund Owners: 322%
Wow. Currently 459% of OSTK is owned by major financial institutions. There are plenty of minor ones and individual investors, which means that there’s money out there in Overstock stock (unintended pun, but oh well), enough money to buy 5 Overstocks. That’s why their CEO is happy to receive the SEC notice, the notice that might start an investigation into the current naked shorting practices.
