Overstock completes tZERO security offering, raises far less than anticipated

Posted: 11 August 2018 6:00 am
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A Chinese private equity firm will buy up to US$270 million in tZERO equity at a US$1.5 billion valuation.

American internet retailer Overstock revealed that its Security Token Offering (STO) for subsidiary tZERO raised US$134 million, which is a little over half of the firm's original financial goal of US$250 million.

Overstock chief executive Patrick Byrne announced the results during the firm's latest quarterly earnings call.

"So we closed our Security Token Offering. We had executed phase of US$174 million, and the STO raised US$134 million in aggregate consideration," Byrne said this week. "That includes a repurchase agreement for GSR to buy the tokens that Overstock received as repayment for our intercompany debt with tZERO."

GSR Capital, a Chinese private equity firm, has agreed to purchase up to US$270 million in tZERO equity at a US$1.5 billion valuation, plus US$104 million in OSTK stock at a 5% discount with the closing price on August 1.

Earlier this year, in June, Overstock reported that it had signed a letter of intent with GSR Capital for a purchase of US$160 million in tZERO security tokens at a price of US$10.00 per token.

Byrne is hopeful that this partnership will generate strong adoption of tZERO in Asia and other capital markets.

"As we work with GSR, they've become interested in ownership across all levels of our enterprise," Byrne said.

"When GSR completes its planned investments, we should have over half a billion dollars. We believe this will provide ample capitalization with which to build a company that can upend global capital markets."

tZERO's STO suffered numerous extensions, due in part to the difficulty of extracting capital from within Asia.

"We did the very best we could... eventually we went to Asia," Byrne revealed on the earnings call. "In Asia it was quite different. The first three people we met... all said 'we'd take $60 million' [but] it proved extremely difficult to get money out of Asia for many different reasons. That's what slowed things down so much."

In a statement released on Thursday, Byrne revealed that between now and the end of the year, Overstock plans on introducing some "leading edge crypto products" that may find their place on the company's retail website.

"It is not out of the question that they will significantly boost organic traffic," he said.

In a demonstration video posted on the company’s website in April, tZERO explains how security tokens might be traded on the blockchain-based front-end platform. You can check out the full video below.

In early March, Overstock and tZERO had its STO placed under review by regulator the Securities and Exchange Commission (SEC), requesting tZERO provide certain documents related to the offering and the tokens.

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