The Bidz.com Controversy

There is a lot of Internet chatter recently about Bidz.com, the mostly-jewelry auction site.

All Bidz’s jewelry auctions start at $1. In a good background piece, Smartmoney describes Bidz’s business model:

Bidz buys its baubles from manufacturers, wholesalers and retailers trying to get rid of unsold inventory, a process that has traditionally meant returning jewelry to the original manufacturer and melting it down for parts.

Last week, a web site named “Citron Research” (the former stocklemon.com) accused the company of “bidding irregularities,” questioned its reliance on its lab, American International Gemologists (AIG), and lobbed several other charges. Their reports are here and here.  This AP story covers the controversy, and here is some of Bidz’s response.  

In the immediate aftermath of the report, the company’s stock fell, and executives held a conference call in response (summary here), answering some pretty hostile questions. Bidz now says it is “investigating” the report’s author, who is short the stock.

One thing no one’s mentioned yet is that I seem to get a lot of Bidz-related spam. One cannot assume it comes from them, but it’s something I have definitely noticed.