Overstock said Wednesday it will loosen a bizarre tangle of restrictions on a blockchain-based dividend that critics said was concocted by ex-chief Patrick Byrne to stymie short sellers.
Shares of the discount furniture site have been on a roller-coaster ride in recent weeks because of the terms of the crypto-dividend, which was slated to be awarded to shareholders of record as of Sept. 23.
Accessible only through a brokerage called Dinosaur Financial, the dividend wasn’t payable until Nov. 15 and wasn’t tradeable until six months after that.
Scrambling to avoid the hassle, short-sellers — who place complex trades that are effectively bets that a stock will drop — began buying Overstock shares more than two weeks ago to exit their positions, sending the stock to a 52-week high of $29.75 on Friday.
But, as reported by The Post on Tuesday, the stock dropped soon after as brokers JPMorgan and Morgan Stanley began offering clients a cash alternative to the dividend.
On Wednesday, Overstock — which saw its eccentric, longtime chief executive exit on Aug. 22 after he said he got romantically entangled with a Russian spy while he was an FBI informant— said it was putting the dividend on hold while it makes it easier to trade.
“We are working with the appropriate regulatory authorities to structure the issuance of the [blockchain] dividend shares so they would be freely tradable by non-affiliates immediately upon distribution,” Overstock said. “We believe this will be a major benefit to investors.”
Under the dividend plan revealed July 30, a crypto-payment was to be awarded to Overstock shareholders of record as of Sept. 23 on tZero, a blockchain-based trading platform operated by an affiliate of Overstock.
Overstock’s shares in Wednesday morning trading were down more than 7 percent after falling 40 percent from mid-day Friday through Tuesday.
In a Wednesday blog post, Byrne said he had “started receiving detailed messages” that Wall Street brokers including JPMorgan, Morgan Stanley and Goldman Sachs told clients the Securities and Exchange Commission was “going to do something special to let short-sellers off the hook.”
“The Powers That Be on Wall Street did not want to let that dividend go through,” Byrne wrote. “They pointed out that it put legitimate short-sellers in a bind, to which my reply was, ‘As CEO of Overstock my responsibility is to shareholders, and not to anyone who might have shorted our stock, legitimately or otherwise.”
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