Overstock Files Unreviewed 10Q

This is amazing.

A tip of the hat to Overstock-news-junkie Gary Weiss here. As Weiss points out, even Bernie Madoff had "some accountant somewhere" who would review his filings. But Overstock files this quarter without an auditor review. And it opens up its press release on the subject by quoting Nietzsche: "All things are subject to interpretation; whichever interpretation prevails at a given time is a function of power and not truth."

I'm getting a Refco-in-October-2005 kind of vibe about Overstock right now.

You may remember that the first time the naive portion of the world learned that there was anything wrong at Refco it was Monday, October 10, 2005, when Refco announced that through an internal review over the weekend it had discovered a receivable owed to the company in the amount of approximately US$430 million.

That struck many people as a rather strange thing to suddenly 'discover' and the stock price started tanking.

Over the course of that week, further revelations came out. I won't go into them now because I have no reason to believe they are useful to the analogy. But the gist of it is, the initial market sell-off was more than justified by the underlying facts. Only one week later, Refco filed for chapter 11 protection.

I'm not saying that the same will happen here. I have no idea. And Overstock's argument with its (former) auditor, Grant Thornton, seems to have involved a matter quantitatively much smaller than the sum involved in the news that broke on October 10, 2005. But this has that feel -- a bit of accounting-matter weirdness that is sufficiently unusual that one suspects there is more to it. Overstock made this announcement after the markets had closed (check the PR Newswire announcement to which I linked you above -- it gives the time of release as 5:35 EST Monday.)

The market will make a judgment soon enough.