Overstock.com, Inc. OSTK shares surged over 20 percent Friday following the announcement that GSR Capital will invest up to $270 million in Overstock’s subsidiary tZero.
What Happened
The Hong Kong private equity firm’s investment of $1.5 billion equates to an 18 percent stake in tZero.
"We are honored to have GSR Capital as a strategic investor," tZERO CEO Saum Noursalehi said in a statement, according to 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."
Why It’s Important
D.A. Davidson analyst Tom Forte discussed both Overstock’s earnings results and recent company news in a Friday note.
The analyst identified several catalysts he said are positive for the e-commerce stock. (See his track record here.)
Retail sales improved substantially by 12 percent, in comparison to a 3-percent increase last quarter and 13-percent decline last year, Forte said.
“Management indicated it that intends to, once again, run its e-commerce business with an emphasis on profitability and therefore it intends to scale back its investment spending and had already started to do so in July."
D.A. Davidson reiterated a Buy rating on Overstock and increased its price target from $103 to $112.
What’s Next
The agreement to sell the 18-percent stake to GSR Capital would diminish Overstock's stake from 81 percent to 63 percent.
“In our view, we see the possibility of the company selling another minority interest to another buyer, as management has previously indicated it was willing to dilute its stake to less than 50 percent,” Forte said. The analyst said the recent achievements place the company on much firmer footing than when the stock hit a 52-week high in January.
Overstock shares were trading up more than 10 percent at $42.48 at the time of publication Friday.
Related Links:
Overstock Falls As SEC Probes 'Dozens' Of Companies Involved With Cryptocurrencies
Despite Overstock's Stalled Common Offering, DA Davidson Remains Bullish
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