Overstock shares drop 25% after ex-CEO announces stock sale

By: Nicolas V.

Shares of online furniture retailer Overstock plummeted 25% on Monday — days after the company’s controversial ex-CEO revealed that he’d sold all his stock in a move he blamed on short sellers.

Investors sent shares of the Midvale, Utah, company tumbling after Overstock gave them a double dose of bad news — saying it will be slashing its earnings guidance and that its CFO is stepping down.

Left unscathed was Overstock ex-CEO Patrick Byrne, who sold his stake, worth $90 million, a week earlier.

Experts say the fortuitous timing could bring the SEC a-knocking.

“Clearly, the SEC is going to investigate this for insider trading,” Chicago-based securities lawyer Andrew Stoltmann told The Post.

“If he received notice of a coming earnings shortfall prior to his resigning and going on a diatribe, he might want to have a very good criminal counsel on speed dial,” Stoltmann said.

Byrne — who resigned as CEO Aug. 22 after admitting to a tryst with a Russian spy — did not return a request for comment.

After selling his stock last week, Byrne pointed to a “deep state” conspiracy by the Securities and Exchange Commission to help the company’s short sellers.

“Whenever I have had any question about whether the SEC would or would not do something totally outrageous in order to hurt our company to benefit their clients on Wall Street, they never let me down: they always did the evil thing,” he wrote on his blog, explaining the sale.

Byrne was referring to the demise of a complex scheme he concocted — before he stepped down — to squeeze short sellers by sticking them with an obscure cryptocurrency in place of their next dividend. The dividends would have been accessible only through a Dinosaur Financial Group brokerage account, and investors would be barred from trading them until May 15, at the earliest.

News of the bizarre crypto dividend sent the stock soaring — up 60% over a two-week period — as short sellers began to unwind their positions. The stock closed Sept. 12 at $26.72 a share, before it began falling back down as the scheme unraveled.

As The Post reported last week, brokerage firms JPMorgan and Morgan Stanley came to the short sellers’ rescue earlier this month by agreeing to take cash of an equivalent value to the digital dividend, which freed up short sellers to continue to borrow the brokerage shares they needed to bet against the stock.

Overstock’s shares then fell 35% from Friday through Wednesday — to close at $16.19 a share Sept. 18 — during which time Byrne sold his shares, according to a regulatory filing.

On Monday, Overstock said it revised third-quarter earnings guidance due to tariffs on goods from China. The retailer did not give a reason for CFO Greg Iverson’s resignation, but said Robert Hughes would step into the role as it conducts a replacement search.

Shares of Overstock closed down more than 25%, to $11.19 — more than 40% lower than their Friday peak.