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Showing posts from October, 2011

Overstock.com (O.co): Insolvency Looming?

Updated at bottom of blog post to include analyst downgrade

Overstock.com (NASDAQ:OSTK), also known as O.co, faces possible insolvency if current earnings trends continue and it cannot restructure two loans with U.S. Bank, its biggest creditor by March 31, 2012 at the latest. In an apparent effort to mask its weakening net working capital position, it played a shell game to window dress its balance sheet at the end of the third quarter (September 30, 2011). Overstock.com owed U.S. Bank $20.329 million under the “Master Lease Agreement” (sale-leaseback) and another $17 million under a “Financing Agreement” (line of credit). Therefore, the company owes U.S. Bank $37.329 million under two loan agreements.

Last week Overstock.com surprised investors by reporting a third quarter $7.8 million net loss (diluted earnings per share of negative $0.33) compared to a net loss of $3.4 million (diluted earnings per share of negative $0.15) in the previous year’s third quarter. Its net loss was $0.1…

Overstock's "Likely" Breach of Debt Covenants

Yesterday, Overstock.com (NASDAQ: OSTK), also known as O.co, issued a press release and surprised investors by reporting a third quarter $7.8 million net loss (diluted earnings per share of negative $0.33) compared to a net loss of $3.4 million (diluted earnings per share of negative $0.15) in the previous year’s third quarter. Its net loss was $0.10 per share higher than was projected by Wall Street analysts. Third quarter revenues declined 2% to $239.7 million, compared to $245.4 million in the previous year's third quarter.

Overstock also filed a separate 10-Q report with the Securities and Exchange Commission and buried even worse news deep inside the footnotes on page 43. The company revealed "it is likely" that it won't comply with certain key terms of  its Master Lease Agreement (sale-leaseback transaction) with U.S. Bank at December 31, 2011 (the end of its fourth quarter), unless "current trends improve substantially." The 10-Q report was filed 27…