SecProbe.io

CORRESP
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filename1.htm

  6350 South 3000 East

  801.947.3100 phone

  Salt Lake City, Utah 84121

  801.944.4629 fax

  July 28, 2010

H. Christopher Owings

Assistant Director

United States Securities and
Exchange Commission

Division of Corporation
Finance

Mail Stop 3561

100 F Street, NE

Washington, D.C. 20549

Re:          Overstock.com, Inc.

Registration Statement on Form S-1

Filed May 14, 2010

File No. 333-166871

Form 10-K for the Fiscal Year Ended December 31, 2009

Filed March 31, 2010

Definitive Proxy Statement on Schedule 14A

Filed April 9, 2010

Form 10-Q for the Fiscal Quarter Ended March 31, 2010

Filed May 4, 2010

File No. 000-49799

Dear Mr. Owings:

Set forth below are the
responses of Overstock.com, Inc. (the “Company,” “we” “us” or “our”), to comments received from the
staff of the Division of Corporation Finance (the “Staff”) of the
Securities and Exchange Commission (the “Commission”) by letter dated July 22,
2010, with respect to the Company’s Form S-1 initially filed with the
Commission on May 14, 2010, File No. 333-166871 (the “Registration Statement”).

Concurrently with the
submission of this letter, we are filing through EDGAR Amendment No. 2 to
the Registration Statement (“Amendment No. 2”). For your convenience, we are
also sending you by Federal Express a copy of Amendment No. 2 marked to
show all changes to the Registration Statement.

For your convenience, each
response is prefaced by the exact text of the Staff’s corresponding comment in
bold, italicized text.

Registration Statement on Form S-1

The Rescission Offer, page 12

Background and Reasons for the
Rescission Offer, page 12

1.             We
note your response to comment 13 from our letter dated June 11, 2010. In
particular, you state that you are making a “complete rescission offer.”
However, based on your disclosure it appears that you are not conducting a
complete rescission offer since you are not making the offer to all purchasers
of the original offering. Please revise your registration statement to indicate
that your offer is only a partial offer, in that, you are only making the offer
to certain purchasers and that you do not intend to make a future offer
covering any of the purchasers who are not covered by this offering or tell us
why it is not appropriate for you to do so.

In response to the Staff’s
comment, we have revised the disclosure as requested on page 13 of
Amendment No. 2.

Form 10-K for the Fiscal
Year Ended December 31, 2009

Item 7. Management’s Discussion
and Analysis of Financial Condition…,page 52

Executive Commentary, page 60

2.             We
note your response to comment 19 from our letter dated June 11, 2010.
Please confirm that you will, to the extent applicable, include the discussion
you included in your response regarding “Direct vs. fulfillment partner
business” and “Factors to Profitability” in your future filings.

In response to the Staff’s
comment, we confirm that we will, to the extent applicable, include the
discussion we included in our response regarding “Direct vs. fulfillment
partner business” and “Factors to Profitability” in our future filings.

Gross
Profit, page 62

3.             We
note your response to comment 22 from our letter dated June 11, 2010.
Please confirm that in future filings you will include your response as to why
you elected to forgive certain underbillings due from your fulfillment partners
during the period covered by the report, as applicable.

In response to the Staff’s
comment, we confirm that in future filings we will include our response as to
why we elected to forgive certain underbillings due from our fulfillment
partners during the period covered by the report, as applicable.

2

Redeemable
Common Stock, page 74

4.             We
note your response to comment 25 from our letter dated June 11, 2010. We
note that you intend to quantify in future filings your maximum estimated
liability at various recent market prices. Please provide a sample of this
disclosure and please confirm that you will disclose in future filings, if
true, that your estimated liability represents the dollar amount of common
stock that was acquired by participants at a per share price greater than the
hypothetical or recent prices you used to calculate your estimated liability
and these purchasers are the ones more likely to accept the offer.

In response to the Staff’s
comment, following is a sample of the disclosure we intend to provide in future
filings:

Based on the closing price of
Overstock common stock of $18.07 at June 30, 2010, we anticipate that of
the $821,000 of affected stock outstanding as of June 30, 2010, it would
be uneconomical for participants to attempt to rescind their acquisitions of
more than $155,000 of the stock which represents the dollar amount of common
stock that was acquired by participants at a per share price greater than
$18.07 and therefore these purchasers are the ones more likely to accept the
offer. The actual amount of our potential
liability will be determined based on our closing stock price on the date of
expiration of the rescission offer, as under the anticipated terms of the rescission
offer we will not repurchase shares if the amount paid by participants for the
shares, plus interest, is less than our closing stock price on the date of the
expiration of the rescission offer (as such participants would be in a position
of having an unrealized gain, not a loss). The following table discloses
the aggregate potential liability based on a range of hypothetical closing
prices of our common stock:

  Closing

  Aggregate
  Potential

  Stock
  Price

  Liability

  $

  7.50

  $

  821,000

  $

  10.00

  $

  757,500

  $

  12.50

  $

  380,577

  $

  15.00

  $

  192,033

  $

  17.50

  $

  154,976

  $

  20.00

  $

  128,025

  $

  22.50

  $

  51,373

  $

  25.00

  $

  —

In further response to the
Staff’s comment, we confirm that we will disclose in future filings, that our
estimated liability represents the dollar amount of common stock that was
acquired by participants at a per share price greater than the hypothetical or
recent prices we used to calculate our estimated liability and these purchasers
are the ones more likely to accept the offer.

3

Note
16. Commitments and Contingencies, page F-35

5.             We
note your response to comment 30 from our letter dated June 11, 2010.
Please show us what your disclosure will look like revised. You state you propose
to disclose your potential losses in excess of the amount accrued that are
reasonably possible in future filings. Please explain why you do not believe it
is material to investors to amend your filing to disclose your exposure to loss
for those matters, such as the California District Attorney matter where it is
not currently disclosed, or disclose that you are unable to estimate the
potential loss or range of loss with any reasonable certainty.

In response to the Staff’s
comment, we are providing the following inset paragraph is an example of the
disclosure proposed with the additional disclosure underlined:

In September 2009, the
Company received a letter of determination from the Ohio Department of Taxation
noting the Department’s determination that the Company is required to register
for remitting of the Commercial Activity Tax, and owes $612,784 in taxes,
interest, and penalties as of June 30, 2009. The nature of the loss
contingencies relating to claims that have been asserted against the Company
are described above. The Company has accrued a liability for this loss
contingency. However, no exact estimate of the loss or range of loss can be
made. It is reasonably possible that the potential loss may exceed our accrued
liability.  The Company believes the
determinations to be unlawful, erroneous and is vigorously contesting the
determination.

In the above example, we do
disclose, as staff has suggested, that we are unable to estimate the potential
loss or range of loss, and that the potential loss may exceed our accrued
reserve.

In our future filings we
will make similar disclosures as shown above on a case by case basis in all
instances wherein it is reasonably possible that the potential loss may exceed
our accrued liability. In none of these instances are we currently able to
estimate the amount of the loss in excess of what we have accrued. However,
both the California District Attorney Matter and the example provided above
disclose our maximum potential exposure (this disclosure was included in our
originally filed Form 10-K in Footnote 16).

As our original disclosures
include our maximum potential exposure on the above noted legal matters, a
general disclosure indicating that it was reasonably possible that a loss in
excess of the amount accrued existed, and a comprehensive description of all
legal matters, we believe that our historical filings complied with paragraphs
3-5 of FASB ASC 450-20-50. We believe that the proposed changes to our future
filings as shown in the above example add additional clarity, but are not
materially inconsistent with what we originally disclosed. Accordingly, we
believe adding such clarity in future filings is sufficient and an amendment to
the original filing is not necessary.

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Definitive
Proxy Statement on Schedule 14A

Base
Salary, page 24

6.             We
note your response to comment 35 from our letter dated June 11, 2010.
Please discuss the aspects of Mr. Johnson’s performance that led your
Compensation Committee to increase Mr. Johnson’s salary and how they
determined that the increase from $225,000 to $250,000 was appropriate.

In response to the Staff’s
comment, we advise you that the Compensation Committee increased Mr. Johnson’s
salary from $225,000 to $250,000 effective January 1, 2009 because of the
Compensation Committee’s subjective appraisal of Mr. Johnson’s performance
during the first six months he had served as our president (Mr. Johnson
was appointed as our president in July 2008). In reaching its conclusion
that Mr. Johnson deserved the $25,000 increase to his annual salary, the
Compensation Committee reviewed the history of Mr. Johnson’s salary,
bonuses and equity-based grants in prior years, and reviewed market data to
ensure that the Committee was aware of current compensation practices, as
described on pages 22-23 of the proxy statement. The aspects of Mr. Johnson’s
performance during those six months that led the Committee to increase Mr. Johnson’s
salary were his leadership of the Company, his development of the Company’s
executive team, his work supervising portions of the Company’s most significant
litigation and governmental relations matters, his leadership in negotiating
changes to the Company’s relationships with certain of its commercial service providers,
and his work chairing Company efforts to reach operational goals and financial
improvements.

In further response to the
Staff’s comment, we propose to add the following additional disclosure in our
next future executive compensation disclosure:

The Compensation Committee’s
decision in early 2009 to increase Mr. Johnson’s salary by $25,000 from
its 2008 level was based on the Compensation Committee’s subjective appraisal
of Mr. Johnson’s performance during his first six months as our president,
from July 2008 through December 2009. Although the Compensation
Committee reviewed the history of Mr. Johnson’s salary, bonuses and
equity-based grants in prior years, and reviewed market data to ensure that the
Committee was aware of current compensation practices, the Committee’s decision
to increase Mr. Johnson’s salary from $225,000 to $250,000 was the result
of the Committee’s subjective views of Mr. Johnson’s leadership of the
Company, his development of the Company’s executive team, his work supervising
portions of the Company’s most significant litigation and governmental
relations matters, his leadership in negotiating changes to the Company’s
relationships with certain of its commercial service providers, and his work
chairing Company efforts to reach operational goals and financial improvements.
The Committee determined the amount of the increase by estimating an amount the
Committee believed would be sufficient to recognize Mr. Johnson’s
performance as described above.

5

Executive
Compensation Action Taken After Year-End, page 27

7.             We
note your response to comment 38 from our letter dated June 11, 2010.
Please confirm that you will discuss in your future fiscal year 2010 executive
compensation disclosure the reason(s) the Compensation Committee elected
to increase the salaries of your named executive officers and why in the
amounts selected.

In response to the Staff’s
comment, we confirm that we will discuss in our future fiscal year 2010
executive compensation disclosure the reason(s) the Compensation Committee
elected to increase the salaries of our named executive officers and why in the
amounts selected.

Directors
Compensation Table, page 33

8.             We
note your response to comment 41 from our letter dated June 11, 2010. We
note that you paid Mr. Joyce $1,250,000 because you “considered that a
fair payment for the results he had achieved for the Company.” Please describe
the results he achieved for you and how you determined that $1,250,000 was a fair
payment.

In response to the Staff’s
comment, we advise you that Mr. Joyce served as a consultant to the
Company for several years. During that time, he worked on a number of
strategically important projects for us relating primarily to: (i) the
logistics of our relationships with our fulfillment partners, (ii) the
reduction of returns of merchandise to us, (iii) internal forecasting and
analytics projects, (iv) strategies for reducing stale inventory and
increasing our product selection and availability, (v) our reverse
logistics operations, (vi) the development of our returns processes and
applications, and (vii) our supply chain. Although it is impossible to
quantify the financial effects of the work Mr. Joyce did for us with any
degree of precision, we internally estimate that his work for us resulted in
cost reductions of approximately $3 million in the variable handling costs at
our distribution centers from 2007 to 2008. In addition, the annualized run
rate of cost savings at the end of Q1 2009 for projects started that year was
between $15 million to $16 million. In light of these results, our CEO
determined, in negotiation with Mr. Joyce, that a significant payment of
$1,250,000 was a fair payment to Mr. Joyce.

Form 10-Q
for the Fiscal Quarter Ended March 31, 2010

Item 4.
Controls and Procedures, page 38

Changes
in Internal Control Over Financial Reporting, page 39

9.             We
note your response to comment 43 from our letter dated June 11, 2010. You
indicated that changes to your internal controls over financial reporting were “in
progress at March 31, and had not been completed at that date…” Please
tell us what

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you mean by “in progress”
and why these “in progress” changes did not materially affect your internal
controls over financial reporting.

In response to the Staff’s
comment, what we mean by “in progress” is that we began to initiate these
changes near the end of the first quarter of 2010. Due to the timing of when we
began to enact these changes, the changes were in process and not fully
implemented at March 31, 2010. The following are examples of the in
process changes at March 31, 2010:

·      New professionals hired near
the end of the quarter did not have sufficient time to assimilate into their
positions at Overstock. As a result, these individuals did not have adequate
time to implement changes to the existing controls over financial reporting nor
was there sufficient time to assess the impact on our internal controls of
hiring these new individuals. Furthermore, we did not complete the hiring
process for all of the newly slated positions until the second quarter