Overstock (NASDAQ: OSTK) stock is up 16% as an activist investor, JAT, suggests some fairly radical changes to the company as well as reveals a 9.1% stake. The changes suggested include moving Marcus Lemonis up to Executive Chairman and a pretty radical change in the management incentive structure. Put together these indicate a desire to convert what has been looking like a fairly stodgy corporate vehicle into something more akin to a start up. At least, to align the management incentives more that way. Whether this is quite the way to go is another matter of course. But it’s certainly an interesting suggestion and could well have merit given the BBBY acquisition.
The base line of business: “Overstock.com, Inc. operates as an online retailer in the United States. It offers furniture, décor, area rug, bedding and bath, home improvement, outdoor, and kitchen and dining items. The company provides its products and services through its internet websites comprising overstock.com, o.co, overstock.ca, and overstockgovernment.com.” It might be fair to suggest that it never quite has lived up to the possible promise of the premise. It’s also been going for some time, meaning that it might be a bit more corporate than is necessary.
There’s also this to consider, the BBBYQ: “All of these ideas that Cohen - or some other hedgie - will ride to the rescue don’t make sense, For there’s nothing there to rescue. The brand’s gone - to Overstock - the stores are all gone. The only thing there is that debt pile.”
Overstock stock price from Google Finance
Well, now we do get a hedgie interested. But it’s not in BBBYQ, it’s in OSTK - which now owns that Bed, Bath & Beyond trademark. And the proposals look interesting at least: “Overhaul of the management and Board compensation structure to reduce or eliminate cash compensation, and to emphasize stock option participation. CEO role to be offered a meaningful option package at strike prices meaningfully above current market price to align interests with shareholders. Marcus Lemonis to have his position elevated. Executive Chairman as a preferred option. Conduct an immediate strategic review of the Issuer’s non-core assets (most notably the Medici portfolio), including evaluation of a potential sale or spin-off of such assets.”
Effectively, and the way we read it at least, the idea is to strip back fro the current perhaps too corporate style and move to something more like the incentives within a start up. Instead of the salaries that go with managing a mature operation, go to the options and stock awards - at above current market prices - which motivate management to dash for growth. Given the potential change of that BBBY acquisition it’s not obvious that it’s a bad idea either. There’s support on Twitter for the idea. Now, whether it will all work - even be implemented - is a different thing but it looks like there could be interesting times ahead here.