Overstock.com Plunges on New Share Offering as the Shift to Crypto Continues
Overstock.com (OSTK), the parent company behind the tZero ICO, plunged on Tuesday after the e-commerce giant announced 4 million in new share offerings. The stock is down a staggering 41% this year, a microcosm of the so-called crypto proxy stocks which have failed to deliver in light of the recent market downturn.
Overstock Down Double Digits
The value of OSTK plunged 15% on Tuesday to close at $37.93. The decline accelerated in after-hours trading, with prices falling another 1.1%, according to data provided by The Wall Street Journal.
With the decline, Overstock has entered oversold territory on the Relative Strength Index (RSI). Although this implies that a short-term recovery is in play, price action remains extremely weak, with the 2o-day and 50-day simple moving averages trending firmly lower.
The company is listed on the technology-heavy Nasdaq, which plunged nearly 3% on Tuesday.
Overstock announced at the beginning of the week that it will issue 4 million shares of new common stock. The company’s underwriter, Guggenheim Securities, also has the option to add 600,000 units to the new issue. As of Tuesday’s closing price, the new offering would amass $151.7 million, down nearly $27 million from when the announcement was made on Monday.
The Shift to Crypto Continues
Overstock is attempting to make a bigger push into the blockchain arena, but has struggled to find a suitable buyer for its retail business. Expectations of a swift sale of its retail operations led some analysts to boost their target price for OSTK stock to as high as $100 last November. Share values have since dwindled to about a third of those levels.
The multi-billion-dollar retailer surged into the spotlight last year after releasing details of its cryptocurrency platform tZero. The exchange, which has already secured $100 million via private offering, says it will bring distributed ledger technology to the capital markets.
Overstock was one of many cryptocurrency plays to receive a formal inquiry by the U.S. Securities and Commodities Exchange (SEC) as part of a wider investigation into ICOs. The details of the inquiry were included in a Dec. 18 SEC filing that was subsequently released in early March.
Unlike more conventional ICOs, the tZero project is issuing tokens via the Simple Agreement for Future Equity (SAFE) model.
Overstock’s chief executive Patrick Byrne has disclosed other crypto-related ventures at his firm, including a 60 million-unit holding of Revencoin, the digital peer-to-peer network for asset transfers. The cryptocurrency, which trades under the symbol RVN, surged 84% on Tuesday, according to data provided by CoinMarketCap. There are more than 715 million units of the coin already in circulation, bringing the total market cap to $52.1 million.
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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