Overstock (OSTK) is an internet retailer that was founded in the late 1990s. Just by that, you’d think they’d be doing pretty well – any ‘90s-era internet company that survived the tech burst and the Great Recession must be doing be doing some right, right? Well, not really. Overstock’s stock is down more than 80% from 2018 highs, and the company is fresh off a 20% freefall since last Friday.
While the company had been one of the first to embrace bitcoin and generated significant revenue by holding reserves of the cryptocurrency during its 2017 surge, Overstock has not been able to fully transition from an e-commerce model to a blockchain company, as it had hoped through subsidiary Medici Ventures. Overstock’s freefall since last Friday has come as private equity group GSR Capital announced a delay in its investment in tZERO, a Medici company, which was announced this past summer. The group was expected to close three days ago, but because its strategic partner was unable to complete due diligence, it had to delay the closing. Investors got nervous and fled the stock.
Separately (and coincidently) GSR also recently contracted tZERO to develop a smart contract token to be used for its upcoming sale of cobalt. GSR’s commitment of $30 million to the Overstock subsidiary is encouraging news, according to Allen Klee of Maxim group. Klee, who reiterates his Buy rating and $75 price target, says “GSR committing to buying $30M of tZERO tokens and signing and paying to help fund the cobalt security show commitment to tZERO.” (To watch Klee’s track record, click here)
Klee also sees the delayed investment as a nonissue. He says, “the stock market…overreacted to the delay in the GSR investment, and that bringing in another strategic investor and cobalt token issuance are positives for longer-term outlook.”
On the subject of long-term, Klee says, “the delay in funding does not change our long-term thesis, and the upcoming cobalt token gives us greater confidence in tZERO moving to commercialization.” The analyst says that he expects the delay to be about three months, but none of his “minor adjustments…change our revenue forecast or fundamental view.” Finally, he believes “tZERO will be the most meaningful nearer term contribution from the company’s blockchain investments.”