JAT Capital letter to Overstock.com Inc.

$OSTK

November 2, 2023

To the Board of Directors of Overstock.com: JAT Capital does not call for changes at our porƞolio companies oŌen, and it is only aŌer careful consideraƟon and in circumstances that are parƟcularly unusual. This is one such case. Pursuant to numerous and repeated conversaƟons we have had with board members, management, other investors, the sellside analysts that cover your stock, and the vendor community that sells product through your website, we have arrived at the following observaƟons, conclusions and recommendaƟons:

OBSERVATIONS AND CONCLUSIONS:

1) Senior Management: within our vast number of conversaƟons it is a near unanimous point of view that management has lost the confidence of the shareholders, investment community and vendors. This is well understood.

2) Investor Interests are Being Subverted: the personal interests of certain individuals appear to be being placed above the interests of shareholders. There are numerous examples, but last week, despite repeated recommendaƟons from several interested parƟes that Marcus Lemonis be involved in the earnings call, Marcus was told he was not to parƟcipate, and the only offered explanaƟon, we concluded, equates to protecƟng the reputaƟon of senior management.

3) Business is Being Mismanaged: recent performance has been poor. Revenue is falling at a rate not similar to any comparable company, and this is occurring despite the Company invesƟng aggressively and burning cash.

4) Messaging is Poor: the near universal feedback we have received is that the communicaƟon from the Company is either confusing or not helpful at all. Despite poor recent results that were a surprise to the investment community, management was quoted as saying “we are on plan”. The Company has scheduled an analyst day for next week and we are aware of mulƟple invited analysts who do not plan to aƩend because the event, if it were to be conducted with current management, is regarded as “useless”.

5) ProspecƟve MarkeƟng Campaign is a “Bet the Company” Moment: the Company is about to embark on a brand transiƟon and markeƟng campaign that is unprecedented in the Company’s history, current management has no experience in managing, and is forecasted to burn half of the Company’s exisƟng cash. This requires focus, clarity, experience, and the most qualified personnel available to manage.

6) Marcus Lemonis is Clearly the Most Qualified Person Available to Manage the Business: the Company is fortunate to have added Mr. Lemonis to the Board. Marcus has taken an acƟve role in working with the team to address a variety of issues, and the feedback we have goƩen has been unanimously posiƟve. We were pleased to learn how well known Marcus is amongst the vendor community, and he appears well posiƟoned to work with these vendors to drive meaningfully more volume through the Overstock plaƞorm. Marcus has offered to allocate a significant porƟon of his Ɵme to the Company, has already bought a significant amount of stock personally, and has already demonstrated an ability to communicate effecƟvely with Wall Street through the prepared remarks he wrote for the earnings event, which were very well received.

RECOMMENDATIONS:

1) CEO Change: the current CEO needs to be removed immediately. He has performed poorly (as demonstrated by the company’s financials relaƟve to its peer group), he has communicated poorly with investors and the sellside community, and he has recently taken acƟons that give the appearance that his own interests are being prioriƟzed.  

2) CompensaƟon Structure: an opƟon pool should be established that should be used to compensate exisƟng Board Members and Senior Management whose cash compensaƟon should be reduced, but this pool should also be used to recruit new talent to the Company, including a new CEO.

3) Marcus Lemonis Should Operate the Company: Mr. Lemonis is unquesƟonably the most qualified individual available to the Company to manage the business. It is my strong belief that if the Company engages in an exhausƟve execuƟve search while dangling an opƟon package as incenƟve, the Company will not find anyone more qualified than Marcus. He has the confidence of the Company’s investors, the sellside community, porƟons of the Board, the vendor community, and reportedly the employees that have engaged with him. Subject to Board oversight, the interim CEO should report directly to Marcus, and he should be given operaƟonal control with laƟtude to make the decisions required to steer the Company through this criƟcal Ɵme. I have asked repeatedly what good reasons exist to not do this, and nobody, including members of the Board, has been able to provide me with a valid answer. Not making this decision, parƟcularly when Marcus has offered to do it, gives the appearance that the Board is making decisions out of self-preservaƟon or for loyalty to long Ɵme employees, which would be, of course, not appropriate.

4) Analyst Day: the Company has already scheduled an analyst day for next Monday, November 6. This analyst day was allegedly put on the calendar, oddly, because the current CEO desired to “ring the bell” on the New York Stock Exchange on Tuesday morning. The analyst day should not go to waste. It is my understanding that some analysts intend to not aƩend this event because the Company has not indicated who from Overstock will be in aƩendance, and if it is simply the current management and IR team it is perceived to be not useful. I recommend that management changes occur in advance of next Monday, and Marcus Lemonis aƩend this event and run it as the primary face of the Company.  

As I have discussed with several of you, these changes are obviously in the best interests of shareholders. We hope that you have the courage to make decisions which I know are difficult on a personal level, but are clearly aligned with your fiduciary duty to the shareholders. We are depending on you.

We look forward to seeing these changes made and working with you in the future.

Best regards,

John A. Thaler

CIO of  JAT Capital Management, LP

Source:

https://www.sec.gov/Archives/edgar/data/1130713/000101359423000872/ex992tojat13da1-110223.pdf