Overstock announces earnings restatement

Shares of Overstock.com (NASDAQ: OSTK) fell sharply on Friday after the company reported yet another quarterly loss and disclosed that it would have to restate its earnings. In the press release announcing the restatement and earnings, CEO Patrick Byrne told investors that "The total effect of the errors over the five and a half year period (during which we generated nearly $3.5 billion in revenues) is a reduction in revenue of $12.9 million and a $10.3 million increase to cumulative net loss."

In the grand scheme of things, this isn't material. And there's certainly no reason to think this is anything other than an error -- a result of Overstock being a sloppy, poorly run company with a distracted CEO battling the imaginary demon of naked short selling, but not accounting "fraud."

Here's the best part: One of the imaginary demons that Patrick Byrne was out battling was Gradient Analytics, a small independent research outfit that Overstock sued for putting out negative research reports. Earlier this month, the lawsuit was settled. In that press release, Overstock said that "Gradient now believes that, to the best of its knowledge, Overstock's stated accounting policies did in fact conform with Generally Accepted Accounting Principles (GAAP) and regrets any prior statements to the contrary."

Here's my question: was Overstock aware of the need for an earnings restatement when it settled the lawsuit? Or did it push through a settlement just before it disclosed that Gradient's allegations of accounting issues were proven to be right on the money? We may never know.

The larger point is that Overstock shareholders would be much better off if Patrick Byrne devoted his energy to managing his company, not lashing out at anyone who says mean things about him.