Overstock.com Shares Spike 17% After Chinese Private Equity Firm Pledges $270 Million for tZERO
Shares of Overstock.com (OSTK) surged in after-hour trading Thursday after a major Chinese equity firm agreed to invest in tZERO, the blockchain subsidiary vying to reshape the investment world through a SEC-regulated alternative trading system (ATS).
GSR Capital to Invest Heavily in tZERO
CNBC confirmed on Thursday that Hong Kong-based GSR Capital will invest up to $270 million in tZero. The investment is based on a valuation of $1.5 billion, giving GSR an 18% stake in the new blockchain startup. GSR will also buy $30 million worth of tZERO security tokens.
“We are honored to have GSR Capital as a strategic investor,” said tZERO CEO Saum Noursalehi in a statement, as quoted by CNBC. “The tokenization of securities has the potential to disrupt global capital markets responsible for moving hundreds of trillions of dollars. Together with our partners, we will globalize our blockchain-based platform, bringing more efficiency, liquidity, and trust to capital markets.”
The announcement came less than six weeks after GSR Capital signed a letter of intent with Overstock to purchase $160 million worth of security tokens.
Launched in December, tZERO’s initial coin offering (ICO) has raised $134 million to finance its ATS infrastructure, which will provide a regulated venue for securities trading. The company plans to build similar systems around the world.
Despite a highly successful crowdraise, documents submitted to the SEC earlier this year revealed a target of $250 million. Independent valuations had placed tZERO’s ICO anywhere between $200 million and $500 million.
Overstock.com’s share price was up by as much as 21% after-hours. It would eventually settle at $45.40 for a gain of 17.6%.
As the following chart illustrates, the OSTK price rose 4.5% in regular trading on Thursday to settle at $38.60.
Despite the gain, OSTK has been a dismal performer this year. Share prices are down 40% year-to-date, vastly under-performing the Nasdaq Composite Index, which has returned more than 14%. What’s more, the stock is trading at less than half of its 52-week high.
Overstock’s share price has been rocked by disappointing quarterly results and the cancellation of a proposed public stock offering. Last March, the company offered four million shares of common stocks before abruptly cancelling those plans. Noursalehi said the decision to pull the offering was due to “market volatility and price.” To be sure, OSTK had declined 20% following the initial announcement to issue common stock.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
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