Overstock.com (NASDAQ:OSTK) posted earnings today sharing full year 2017 numbers of revenue of $1.7 billion (-3% growth) and a pre-tax loss of ($47.7) million. Q4 did not help as revenue declined by $456 million with a pre-loss of ($24.9 million). Shares dropped following the news but for many individuals listening to the call it was more about Overstock’s blockchain future and Patrick Byrne’s vision for tZero. At one point during the report, it was referenced that over 1300 people were live-streaming the report.
Overstock’s foray into Blockchain and security tokens has been (so far) a fascinating odyssey. As it was mentioned during the call, there is one ATS in the US that is operating a blockchain based – securities token ready platform – and that is tZero. Additionally, the subsidiary Bitt is the only company currently offering crypto-fiat money – first in the Caribbean.
While much of the early discussion focused around the corporate battle between challenger e-commerce site Wayfair and Overstock’s expensive response, a good portion of the presentation, and ensuing Q&A involved Fintech – specifically blockchain technology and its utilization.
tZero is currently engaged in an initial coin offering (ICO) for a security token that is actually preferred equity. The company expects to raise at least $250 million. While tZero will not be alone in its pursuit of creating a Blockchain based platform to compete with Wall Street, it is the first in the US. As the Securities and Exchange Commission has cracked down on the offering of unregistered securities (ICOs), ostensibly pitched as utility tokens, tZero and Byrne believe their vision is the future of finance which is a compliant, and fully regulated platform and securities offerings.
Blockchain Meets Capital Markets
- They have purchased 60 million Raven Coins at $0.03 and have assisted with platform development (RVN)
- They welcome the SEC’s investigation, the harder the SEC looks the better they [tZero] looks
- Overstock is not a Bitcoin proxy play even though there appears to be a price correlation between the two assets
- Existing cryptocurrency exchanges are breaking the rules. They are not registered as ATSs
- Overstock has engaged Guggenheim to consider “strategic alternatives,” possibly a sale of e-commerce assets
- Blockchain enterprises under Medici are said to be progressing nicely. They believe they have a strong head start in a number of products under development. DeSoto, Bitt, and tZERO are most known, but there are some other developments within Medici that bear watching
- The ICO has been incredibly difficult to manage but demand has been strong
- An unknown number of central banks have reached out regarding Bitt
Byrne noted the power and the potential of combining e-commerce and financial services. While e-commerce can be a thin margin business that needs massive scale, providing financial services can be highly lucrative.
There is plenty more available on the call.
tZero, and Medici in general, will continue to be a must watch story.