Overstock could raise around $30 million via blockchain stock offering

Rage Review : Last week, Overstock launched a rights offering, which aims to allow existing investors to purchase its preferred stock. These blockchain shares can only be traded on a registered alternative trading system that uses blockchain technology. If 2 million shares are sold, Overstock's proceeds will be approximately $28.86 million. Overstock's issuance of the first public chain security product in history can break the barriers of the financial world and usher in a new era of the global capital market.

Translation: Nicole

Overstock, a highly secure website with an impenetrable domain name, is now making history in the financial sector.

Anyone who typed “kccbd.t0.com” into a web browser over the past week was prompted to create an account with Keystone Capital Corporation (powered by t0). The site could be an entry point to what could be the first blockchain-powered security product.

Announced last year, t0 is a product of Overstock’s Medici division that aims to remove intermediaries from the financial sector by transitioning post-trade processes to a shared distributed ledger.

While many details are being kept secret during a so-called “quiet period,” Overstock has confirmed that it has received its first batch of subscriptions.

The company told CoinDesk:

“Because we are in the product/subscription period, we cannot provide data and do not know how it is received, we can only say that the system is working and people are subscribing.”

Fortunately for industry experts who want to understand the process (or even learn it through their own efforts), Overstock is a public company and much of the process is being documented and available to investors.

Just last week, Overstock launched its rights offering, which is designed to allow existing investors to buy shares of its preferred stock, including shares issued using t?’s blockchain technology, according to SEC filings.

The Blockchain shares will be traded only on a registered alternative trading system that uses blockchain technology and will have a maximum price of $15.68 per share.

The document titled "Blockchain Voting Series A Preferred Stock" details the exact nature of the offering. A total of 2 million Series A preferred shares are expected to be offered, but that number may change. This is an increase of 1 million shares from the previous filing.

Based on the maximum price of $15.68 filed with the SEC, the brokerage will receive $1.25 for each share sold, so Overstock's proceeds are $14.43. At this rate, if all 2 million shares are sold, the maximum amount raised is $31.36 million, and Overstock's proceeds are $28.86 million.

The subscription period will end on December 6, and trading is expected to begin on December 15, exactly one year after the SEC approved Overstock to offer securities on the blockchain.

Costly disruption

Notably, in a document published by the SEC a day before Overstock launched its subscription period, the online retailer revealed exactly how much the effort would cost.

According to earlier analysis of several sectors, the company is losing money rapidly.

Earlier this month, Overstock reported a $3 million pre-tax loss for the third quarter of this year, and we now know that Overstock spent $2.5 million on the rights offering.

Specifically, $1.9 million was spent on legal fees and expenses, $260,000 was spent on accounting fees, and $76,000 was spent on printing and engraving, among other expenses.

Support network

While Overstock is paying for the mess, it's doing more than just disengaging from the product.

Shares and interests in shares will be traded through the accounts of record holders using an alternative trading system registered with the U.S. Securities and Exchange Commission (SEC) and designated brokers.

The system is run by PRO Securities, LLC, a broker-dealer registered with the SEC and partly owned by Overstock.

In September, t0 announced a partnership with Keystone Capital Corporation to provide brokerage support, and earlier this month, Overstock announced that Source Capital Group would serve as its dealer manager.

According to the SEC filing, Overstock has pledged to pay Source Capital 8.0% of its earnings, including a 6.0% commission, 1.8% non-payable fees and 0.2% out-of-pocket expenses.

Bullish stocks

As blockchain’s potential impact on the post-trade market continues to exceed expectations, Overstock’s stock recently broke out to a 52-week high.

Shares peaked at $17.96 per share, giving the e-commerce company a market value of $463 million, according to Equities.com.

While it is not yet known what is behind the surge, that has not stopped market watchers from speculating.

Earlier this month, a Seeking Alpha analyst dismissed Overstock’s value in even signing up to develop blockchain technology.

Then, yesterday, another Seeking Alpha analyst wrote that Overstock is “oozing value,” adding that its “blockchain investments depend on future cash flows.”

Patrick Byrne

On the other hand, Overstock President Patrick Byrne concluded in an SEC filing:

“The issuance of the first public blockchain security product in history can break the barriers of the financial world and usher in a new era of global capital markets.”