BIDZ.com dives after CEO denies negative research report
BIDZ.com, Inc. (Nasdaq: BIDZ) shares are plunging after CEO David Zinberg denied a report released on Monday that said the online auctioneer of jewelry holds excessive inventory, engages in shill bidding and said the firm’s largest supplier is a convicted felon. Citron Research, the source of the report, holds a short position on the stock. Zinberg said the company will take legal action against Citron during the next few days.
During a Tuesday evening conference call, Zinberg called Citron’s report “untruthful and negative” and said BIDZ has no cash flow issues. The firm’s high inventory is a part of a conscious strategy, he said, and the BIDZ has historically held low inventories. On the company’s “F” rating from the Better Business Bureau, the chief executive said there are 241 complaints on file compared with eight million items sold.
Zinberg also denied any shill bidding, saying it is against company policy. He could not explain why some bidders are paying above-market prices for televisions, but said BIDZ receives no revenue from electronic sales. He called accusations that he is paid 30,000 shares each month “absolutely false.”
In an attempt to calm investors, BIDZ said before Tuesday’s opening that the company had record Thanksgiving weekend sales.
“We are pleased to see such a dramatic improvement to our holiday sales,” David Zinberg said in a statement. “It is a testament to the attractiveness of our unique auction format and our continued focus on delighting the customer. We believe that consumers are discovering that there is no other place to go to for quality jewelry at our prices.”
Citron said it will release a second part of its BIDZ report that might cause the stock to sink further.
“Stay tuned for part two in order to get more clarity of the business model of BIDZ,” Citron Editor Andrew Left said in the report. “If the previous quarter is indicative of future performance, Citron believes that Bidz.com will end up in the same bucket as Medifast (NYSE: MED), Housevalues (Nasdaq: SOLD), Escala (OTC: ESCL), and Syntax Brillian (Nasdaq: BRLC).”
Investors were not appeased by the conference call and BIDZ shares are down 23.97%, or $2.85, at $9.04 in morning trading. Over the last 52 weeks, shares have ranged from $4.90 to $22.50.
