Overstock.com 2014 Annual Report Download - page 31

Table of Contents
• prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders;
• provide that the board of directors is expressly authorized to make, alter or repeal our bylaws;
• establish advance notice requirements, including specific requirements as to the timing, form and content of a stockholder’s notice, for
nominations for election to our board or for proposing matters that can be acted upon by stockholders at annual stockholder meetings;
• provide that special meetings of our stockholders may be called only by the board of directors, the chairman of the board, the chief
executive officer or the president; and
• provide that stockholders are permitted to amend the bylaws only with the approval of the holders of sixty-six and two-thirds percent (66-
2/3%) of the voting power of outstanding capital stock entitled to vote at an election of directors.
In addition, Section 203 of the Delaware General Corporation Law may discourage, delay or prevent a change in control of our company. In general,
Section 203 prohibits a publicly held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three
years following the date the person became an interested stockholder, subject to certain exceptions.
The price of our stock may be vulnerable to manipulation.
We filed an unfair business practice lawsuit against Morgan Stanley & Co. Incorporated, Goldman Sachs & Co., Bear Stearns Companies, Inc., Bank
of America Securities LLC, Bank of New York, Citigroup Inc., Credit Suisse (USA) Inc., Deutsche Bank Securities, Inc., Merrill Lynch, Pierce, Fenner &
Smith, Inc., and UBS Financial Services, Inc., and settled the case with respect to all defendants except Goldman Sachs Group, Inc., Goldman Sachs & Co.,
Goldman Sachs Execution & Clearing L.P.; Merrill Lynch, Pierce, Fenner & Smith, Inc., and Merrill Lynch Professional Clearing Corporation. The litigation
is ongoing.
We believe these remaining defendants engaged in unlawful actions and have caused substantial harm to Overstock, and that the remaining
defendants manipulated downward the market price of Overstock’s common stock. To the extent that the defendants or other persons engage in any such
actions or take any other actions to interfere with or destroy or harm Overstock’s existing and/or prospective business relationships with its suppliers,
bankers, customers, lenders, investors, prospective investors or others, our business, prospects, financial condition and results of operation could be harmed,
and the price of our common stock may be more volatile than it might otherwise be and/or may trade at prices below those that might prevail in the absence
of any such efforts. The practice of “abusive naked short selling” continues to place our stock at risk for manipulative attacks by large investment pools and
prime brokers.
Abusive naked short selling is the practice by which short sellers place large short sell orders for shares without first borrowing the shares to be sold,
or without having first adequately located such shares and arranged for a firm contract to borrow such shares prior to the delivery date set to close the sale.
While selling broker dealers are by rule required to deliver shares to close a transaction by a certain date, and while purchasing broker-dealers are obligated
by rule to purchase the sold quantity of shares when they are not delivered to close the sale, these rules are often ignored. Abusive naked short selling has a
depressive effect on share prices when it is allowed to persist because the economic effect of abusive naked short selling is the oversupply of counterfeit stock
to the market. We believe the regulations designed to address this abusive practice are both inadequately structured and inadequately enforced.
Consequently, we believe that without the enactment of adequate regulations and the enforcement necessary to curb these abuses, the manipulations
achieved through abusive naked short selling are likely to continue. We believe that our stock has been subject to these abusive practices by those
attempting to manipulate its price downward. To the extent that our stock is subject to these practices in the future, our stock may be more volatile than it
might otherwise be and/or may trade at prices below those that might prevail in the absence of such abuses.
In the past, our stock has consistently been on the Regulation SHO threshold list.
Regulation SHO requires the stock exchanges to publish daily a list of companies whose stock has failures-to-deliver above a certain threshold. It
also requires mandatory close-outs for open fail-to-deliver positions in threshold securities persisting for over 13 days, with the aim that no security would
appear on the threshold for any extended period. Despite that aim, our common stock has frequently appeared on the Regulation SHO threshold list for
extended and continuous periods and, while we do not currently appear on the Regulation SHO threshold list, in the past our stock has been on the list for
more trading days than any other company.
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