Overstock.com and its former leader Patrick Byrne have prevailed over the dividend-doubting short sellers who cried foul (and filed suit) over the e-commerce siteÃ¢ÂÂs issuance of a digital security.
- On Tuesday, U.S. District Judge Dale A. Kimball tossed the federal class action first filed last September by short sellers who claimed theyÃ¢ÂÂd been hosed by Byrne.
- The suit had been challenged by defendants as Ã¢ÂÂmeritlessÃ¢ÂÂ when they called for its dismissal in May.
- Plaintiffs accused Overstock of fraudulently pumping its stock with misleading financial projections and by promising to issue a digital dividend to shareholders via its tZERO subsidiary, an alternative trading system for digital securities.
- That digital securityÃ¢ÂÂs originally planned six month lockup would have put the squeeze on short sellers unable to cover their positions. In their original filing in U.S. District Court, plaintiffs called it a Ã¢ÂÂsecret plotÃ¢ÂÂ by Byrne to exact Ã¢ÂÂrevengeÃ¢ÂÂ on short sellers
- But if the plot was one for revenge, then it was hardly a secret: Judge Kimball said the digital dividendÃ¢ÂÂs Ã¢ÂÂbroad media coverageÃ¢ÂÂ undercuts plaintiffÃ¢ÂÂs claims that Byrne or Overstock Ã¢ÂÂdeceived anyone,Ã¢ÂÂ according to Law360.
- While ByrneÃ¢ÂÂs very public hatred of short sellers is rivaled perhaps only by Elon Musk, Judge Kimball said thatÃ¢ÂÂs neither here nor there, because Overstock had a Ã¢ÂÂlegitimate business purposeÃ¢ÂÂ for issuing its digital security.
- Ã¢ÂÂOverstock was trying to transition from being a traditional online retailer to a blockchain technology business. The dividend was a creative way to strengthen that transition,Ã¢ÂÂ Judge Kimball said.
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