My favorite corporate sleaze poster child, Overstock.com (OSTK), plummeted 41% Friday on immense volume, despite the usual happy-talk conference call (see transcript) featuring a slap-happy CEO Patrick Byrne and chirping minions. As usual, all was sweetness and light, glossing over the fact that sales and marketing expenses zoomed 80% as the company puked red ink for the umpteenth consecutive quarter.

The reason for the shares plummeting, however, appeared to be that one of Overstock's analysts, who are notoriously timid in their assessments of this company, had the temerity to downgrade the company to "sell." The reason: fear that the company may not "grow" as much as previously.

While it's nice to see one of the sell-side analyst worms turn, I'd say that this sudden realization that all is not well with Overstock is astonishing. Two of my favorite bloggers, Sam Antar and Tracy Coenen, both experts at corporate fraud, have been pointing out the weakness in Overstock's accounting for many months.

Unless these analysts are deaf, dumb and blind, they would surely know that Overstock takes Sam and Tracy very seriously -- and has deployed three paid stooges, led by the nauseating Judd Bagley, to attack and discredit them.

Sam has specifically warned that Overstock was distorting the "growth" numbers reported to the public. He set forth his case in exhaustive detail. But analysts and the clowns at the SEC -- who just gave Overstock's accounting a clean bill of health -- paid no attention.

Until today, analysts have studiously ignored the company's shortcomings, its accounting issues, and other obvious stuff such as the sheer looniness of its CEO, and have swallowed whole the pronouncements of the company. Which only goes to prove that far too much of what passes for research on Wall Street is pretty near useless. That is especially so for companies such as Overstock.com, which make it their business to intimidate critics.

It's not surprising that Byrne placed Eliot Spitzer on his enemies list when he targeted overoptimistic Wall Street research. Aggressive research is the enemy of inept and crooked CEOs. Today's events demonstrate that even tepid research stating the obvious can have a devastating effect.

UPDATE: As usual, Sam and Tracy stepped up to the plate with two great pieces, here and here, on Overstock's latest quarterly book-cooking and the negligence of the SEC.

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Gary Weiss

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