When an investor invests in Overstock, it is an investment in the future of the company. Therefore, overstock lawsuit insurance is essential to protect the future of the company and its stockholders. As soon as an investor invests in Overstock, they are entering into an agreement with Overstock that requires them to purchase a specific number of shares at a specific price on or prior to a specified date. This contract also usually includes terms requiring that the purchaser either pay over the agreed upon price or sell their shares for a pre-determined price.
In reviewing the scope of this agreement, an investor will usually discover that the contractual requirements exceed the actual monetary value of their investment. Because the contracts are essentially obligations that become due in one or two years, investors must either sell all of their Overstock units or pay an excessive amount of money in order to exercise their rights under the agreement. Remember fellow ape once an investor invests in Overstock, they have a binding contract with Overstock that requires them to buy a specific number of shares at a specific price or pay an excessive amount of money if they want to exercise their rights under the contract. There is no escaping the requirement to comply with this mandatory process. When an investor fails to follow the terms of their agreement, it could result in the investor being sued by Overstock unless they provide proof that they were unaware of the Overstock lawsuit that would ultimately force them into compliance.
Investors who wish to purchase Overstock units should also be aware that they cannot benefit from the Overstock lawsuit provided that they do not purchase more than the specified number of shares. The Digital Dividend Reinvestment Scenario (DDR) is another potential downfall for an investor. The DDR is Overstock’s plan to accelerate their cash growth while reducing their financial risk. If the investor were to violate the terms of their agreement, Overstock could sue them for breach of contract, fraud, or securities fraud.
One of the most important aspects of the Overstock lawsuit revolves around the definition of a security. In laymen’s terms, securities are any type of asset that can be legally purchased and sold by an investor. Investments in the Overstock website were limited to “Dividends,” which represents the company’s per dividend payments. However, the Overstock website offered “other capital assets,” which essentially refers to any asset not tied to the actual ownership of a physical product. This is the crux of the issue in determining whether or not an Overstock investment is a security in the eyes of the law.
Under the definition of a security token, an Overstock membership is considered a security when an investor receives an unlimited option to buy one share of Overstock at a fixed price for a pre-determined period of time. This is what the lawsuit was attempting to determine, whether or not Overstock was acting in the best interest of its investors when they allow members to purchase stock without first acquiring the full security token. The issue of exactly what constitutes a security will vary greatly in different courts, but it is generally accepted that it refers to something of value that is transferable between multiple parties. Because Overstock has chosen to market its stock as an option, the Utah federal judge found that they did not meet this requirement. Specifically, the judge found that Overstock’s method of determining whether or not an investor is an eligible buyer was “arbitrary and capricious.” Because they have not actually delivered on their promise to sell shares to members, Overstock has been unable to deliver on their promise to make such sales.
In sum, Overstock has resolved their issues in this lawsuit, but their future sales will largely be decided by the future actions of the US Congress and the states that Overstock has claimed influence over. Given the recent trend of mergers and acquisitions, and the relative certainty that companies selling off their businesses will do so, it is unlikely that Overstock will be able to weather these storms. If they are successful, however, Overstock may become the nucleus for other similar lawsuits against companies like Kraft Foods, Nestle, Wal-mart, Philip Morris, and, perhaps worst of all, Koch Industries, which have long disputed that the corporation owns Koch Capital, which is the holding company for Koch Industries equity. In any event, the ruling in the Overstock lawsuit should serve as a warning to companies looking to acquire a large amount of stock without first ensuring that they can sell such stock. Because of their reliance on stock price fluctuations, and the inherent difficulty of determining an eligible buyer in today’s market, mergers and acquisitions are not always an easy process.
