While most new projects in the cryptocurrency space are merely great ideas that consist of very imaginative white papers, every now and again an established business attempts to join the burgeoning cryptocurrency sector. Overstock.com is a “brick and mortar” business getting ready to take on the blockchain world of Initial Coin Offerings and Token Sales.
Founded in 1997 by Patrick M. Byrne, Overstock.com actually launched in 1999 as an online retailer that specialized in selling surplus and returned merchandise. Today, in addition to selling new merchandise, the company also sells clearance items such as bedding, clothing, furniture, and home decor.
Overstock has been something of an unqualified success and after holding an IPO that offered shares at a price of $13 in 2002, the company recorded a profit of $7.7 million in 2009 while attracting over $800m worth of revenue. It went on to report its first billion dollar year in 2010.
In 2014, Overstock.com began to accept Bitcoin as a method of payment for its goods and CEO Patrick Byrne revealed that Bitcoin sales were averaging approximately $300,000 per month. Around this time, Overstock made its first move into the blockchain world by launching Medici Ventures which operated as a wholly owned subsidiary of Overstock.com, Inc.
Moves into Blockchain
Image via Medici Ventures
Medici Ventures was created to oversee the company’s investments in various blockchain technology businesses and in firms specializing in producing both blockchain and distributed ledger technologies.
Since then, Medici Ventures has grown into an entity that manages a portfolio of nine companies and the current buzz surrounding all things blockchain has resulted in Overstock receiving a number of glowing reports in addition to experiencing some positive price action regarding its OSTK shares.
Tom Forte, a D.A. Davidson analyst and a long time Overstock watcher has recently increased his price target for the OSTK share from $57 to $85. Forte has stated
We now see the possibility of unlocking value in its two most significant assets – its home ecommerce effort and Medici Ventures
Independent investor Marc Cohodes has also echoed this positive sentiment and predicted in October that the Overstock share price could reach as high as $100.
A significant number of investors are starting to sit up and take notice and over the past month the price of OSTK has risen from $38 to around $56, an increase of over 45%. The announcement that roughly 15% of Overstock’s current share count was sold to two private investment firms helped contribute to the rise. One of the firms involved was investment guru George Soros’ Quantum Partners which has a stellar reputation for picking winners.
Additionally, the recent unveiling of a new Medici subsidiary has helped fuel the elevated levels of investor excitement. The new addition to the Overstock family is tZERO (t0), a solution that applies blockchain technology to stock trading and the exchange of digital coins.
Disrupting Stock Trading
Image via IbTimes
Earlier this year, Patrick Byrne announced that tZERO will be launching an Initial Coin Offering (ICO) that is set to commence in November and go on until the end of 2017. At the Money2020 conference in Las Vegas, Byrne spoke about the group’s ambitions stating “While many doubted, the tZERO team worked hard, to be at the tip of the spear in creating and launching credible, capable and institutionally scalable blockchain technologies for crypto assets”.
The ICO is highly anticipated and expected to raise anywhere from $200m to $500m, which may break the records previously set by projects such as Bancor and Tezos. The ICO will be facilitated by the sale of Simple Agreements for Future Tokens (SAFTs), in a model that was successfully used by the Filecoin project, which also managed to raise over $200m during its token sale.
The ICO is being held to raise funds for the Automated Trading System (ATS), a trading platform that supports equity tokens and represents a joint venture between groups such as Argon and RenGen. Currently, the U.S. Security and Exchange Commission (SEC) regulates the sale of equity tokens and no SEC approved exchange actually exists that can handle equity tokens, so Overstock has looked to disrupt the space by creating one.
Byrne has also highlighted that the tZERO token is expected to be classed as a security, within the meaning of U.S. securities laws, and will be considered a security token, as opposed to an app or utility token. AS part of the tZERO’ token sale, buyers will accept to receive tZERO digital tokens that will be issued at a future date following on from the ICO.
The token will be tradable on tZERO’s U.S.-regulated ATS and the majority of the funds raised from the tZERO SAFT sale will be pushed into scaling tZERO’s technology development and regulatory teams. In order to ensure that the technology was in working order Overstock issued its own blockchain securities last December, and distributed over 126,000 company shares via the platform.
From Online Retail to an ICO
As the widespread benefits and applications of blockchain technology are being realized by a growing number of organizations, Overstock seems well-placed to benefit from this emerging technology. Through the parent company and more specialized subsidiaries, the Overstock group has already shown an impressive level of expertise at both leveraging and integrating blockchain operations.
Seasoned analysts fully expect Overstock to make a big splash in the blockchain world via tZERO and for this reason the tZERO ICO will be extremely attractive to investors. However, the large scope of the tZERO ICO represents a clear downside as the current ICO space favours leaner projects with less excessive market caps.
In addition to this, investors are only just coming to terms with the reality of just how badly the Tezos project has fallen apart and a few may be weary of another big budget token sale taking place while the Tezos founders are in the midst of class action lawsuits. That being said, it’s clear that the tZERO project ticks a lot of the right boxes and should attract significant investment from both institutional and retail investors.
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