What do you think the market response to firms that restate their earnings to be on average? In a paper published in the Journal of Accounting & Economics, Palmrose, Richardson and Scholz find that over a two day window, these firms experience a negative 9% drop in their share price, with the most negative declines being when the restatement is enforced by the SEC.
My guess is that Overstock is headed for a rough time... what kind of change would this make in our valuation world? Obviously the current period earnings are affected, but does this change our opinions of growth too? How important is it for a firm to 'return to GAAP profitability'?
This is getting more and more interesting.
ReplyDeleteSo, did overstock.com overstate their netincome or not? I tried to find a copy of their recently filed 10K, but no luck (I found the outline, but not the financial data.)Anyone has any luck?
I read Sam Antar's list of crime overstock.com committed (and by the way, who is this person? A now convicted felon as he calls himself? Very interesting occupation...) and Patrick Byrne's comment on http://www.whitecollarfraud.com/files/34310038.pdf, posted by Sam Antar, not sure who to believe...
Can somebody kindly explain if overstock.com indeed violated the accounting rules?
Either way, I don't think overstock.com is able to compete with my favorite online store, Amazon.com, which is still priced at $61.99 per share compare to overstock.com at$7.5 per share. Also looking at overstock.com's historical data, it seems like the company has reported net loss every year since 2003 according to eval. It is certainly going to be tough for overstock.com in the future.
-Carol Hsieh