Criticism puts auction site Bidz.com under microscope
A few weeks ago, the chairman of online auction site Bidz.com forecast good news ahead. The company was headed for another blowout quarter, David Zinberg said, with sales topping the already-rosy projections made in November.
The announcement was designed partly to quell questions that had been swirling around the Culver City-based company for months.
The questions involve, among other things, what critics say are irregularities in bidding patterns on the site, as well as persistent customer complaints that have led the Better Business Bureau to give the company a grade of “F.”
Critics also have raised questions about Bidz.com's relationship with Saied Aframian, a primary jewelry supplier who served time in prison for receiving stolen property.
Zinberg, an immigrant from the former Soviet state of Moldova, attributes much of the criticism to short sellers -- investors betting on a drop in a company's stock price, and who aren't shy about trying to push it in that direction.
Indeed, public records indicate that investors had sold short nearly 3.9 million Bidz shares as of Jan. 31, a significant proportion of the roughly 10 million shares available for public trading.
Still, the questions appear to be having an effect; Bidz.com's shares have tumbled more than 30% since Zinberg's upbeat Jan. 14 announcement.
As Zinberg tells it, there's no mystery to the company's success. He says Bidz is enjoying strong growth because of the allure of its auction style and management's hard work.
"We come here at 7 a.m., we're the first ones to show up, and we love what we do," he said in an interview at the company's 52,000-square foot headquarters and warehouse.
But there may be reasons for the stock's downdraft other than short sellers' innuendo. Nearly half of Bidz's shares are owned by Zinberg and his sister, Marina Zinberg -- and they have been selling relentlessly, unloading 210,000 shares for nearly $2 million since Aug. 15, regulatory filings show.
In recent months, moreover, the company's two largest institutional stockholders dumped their combined 1.5 million shares. Neither would discuss their reasons for divesting.
Zinberg says his stock sales make up for his decision to take no salary from Bidz. Nevertheless, he cut the pace of sales back sharply starting in December.
