Bidz under fire
The LA Times this week has an attention-grabbing piece on jewelry auction site
Bidz.com – which is surely one of the biggest jewelry sellers on the Internet. According to this appearance, it sells 15,000 items per day, of mostly close-outs. It eventually hopes to be a $1 billion business. It is easy to see why. Bidz is a amusing website. They do have some amazing things on there for auction. It has impressive technology that lets you see prices rise before your eyes. But the now-public company has found itself on the defending because of allegations of, among other things, “shill bidding.” Those charges have been disputed, and the enterprise notes they mostly came from a commentator who was short the stock.
The stock lost more than half its price since November 26, the day it hit a new 52-week high of $22.50, and has failed to rebound since Citron Research released a negative report on the company a few days later.
The research report alleges that the company engages in shill bidding, a
sserts that inventory levels are rising at least 300 percent higher than the company’s revenue run rate, and claims that the CEO is compensated 30,000 shares each month. The company has responded by saying that the allegations are untrue, but admits that Saied Aframian, manager of Bidz.com supplier LA Jewelry and owner of about 5% of Bidz.com shares, has previously had a run-in with the law.
After checking out the site myself, I found an item which includes a reference to a “Rapaport” price – for an item that I’ve never seen on the Rapaport list. But what is possibly the most damning is the company has an “F” rating from the Los Angeles Better Business Bureau (LABBB). The company has claimed, in response, that’s an old rating, and the overwhelming majority of its customers are satisfied. That may be true, but … well, obviously, a company that is now a major player in the market has to do better.
The LA Times article includes the new accusation that Bidz’s lab appraisal service, American International Gemologists, says “it does not physically inspect every appraisal.” I am no appraisal professional, but I think we can all agree, that is not a good way to appraise.