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Overstock Could Sell Retail Unit As Soon As February Amid Blockchain Pivot

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Overstock Could Sell Retail Unit As Soon As February Amid Blockchain Pivot
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Overstock.com Inc (NASDAQ: OSTK) shares — which have lost about three-quarters of their value since the start of the year — were rallying Friday as the e-commerce website announced a shift in its business model. 

What Happened

Overstock, which formally launched the subsidiary cryptocurrency trading platform tZero August 2015, confirmed how serious it is about its crypto foray. The company is planning to put its core online retail business on the block, The Wall Street Journal reported Friday, quoting CEO Patrick Byrne.

Overstock launched in February 2002 as an online retailer, but has since embraced the blockchain business.

Byrne, though not divulging the name of potential suitors, expressed confidence in the sale occuring in February, the Journal said.

The company had launched Medici Ventures as its wholly owned subsidiary in 2014 with the objective of advancing blockchain technology. This unit encompasses tZero as well as a host of other blockchain startups.

Overstock invested roughly $175 million in Medici at the start, but it has lost $39 million in the first three quarters of 2018, according to WSJ. 

Why It's Important

Overstock has been unprofitable of late. It reported a loss of $4.28 per share for 2017. Subsequently, the company posted losses for each of the first three quarters of 2018, reflecting the sagging fortunes of its core online retail business as well as crypto investments. 

Recently released Q3 results reveal a loss of $1.55 per share for the quarter.

After its 2015 unveiling, tZero has not yet launched commercially but has been consuming capital. 

"I don't care whether tZero is losing $2 million a month," Byrne told WSJ. 

Overstock's changed focus is in line with a recent trend of companies with failed businesses pivoting entirely to blockchain models. 

Riot Blockchain Inc (NASDAQ: RIOT), India Globalization Capital, Inc. (OTC: IGCC), Eastman Kodak Company (NYSE: KODK) and most recently Akers Biosciences Inc (NASDAQ: AKER) are among those who have ventured into the world of blockchain. 

What's Next

In Medici, Overstock sees a multibillion-dollar opportunity, and it is confident the investments it is making will pay off in coming years.

Maxim Group analyst Allan Klee had estimated in September that a potential sale of the retail business could be made at one times sales or over twice the market cap of the company, once Overstock reverts to profitability.

The analyst forecast losses for the company from 2018-2020 before it becomes profitable.

Overstock shares were trading 18.2 percent higher at $20.07 at the time of publication Friday. 

Related Links:

4 Potential Overstock Catalysts That Make DA Davidson Bullish

Despite Overstock's Stalled Common Offering, DA Davidson Remains Bullish

Posted-In: BlockchainCryptocurrency News Top Stories Markets Tech Media Trading Ideas Best of Benzinga

 

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