While searching for new ideas on blockchain technology and cryptocurrency stocks, we came across one stock that has had some interesting activity over the recent trading months: Overstock.com (OSTK).

This stock was one of the original (if not the definitive) major player(s) in the cryptocurrency space as a publicly traded company. As such, the recent stock activity looked interesting and worthwhile to look further into.

Our in-depth analysis of Overstock.com (OSTK) stock is divided in 2 Parts :

Part 1 of this post consists of The Story So Far and Bullish Argument on Overstock.com (OSTK)

Part 2 of this post consists of Bearish Argument on Overstock.com (OSTK) and Conclusion

For your reference here is the Overstock.com Investor Relation Link.









The Story So Far

Below, we have the 5 Year chart of Overstock.com stock. There’s a great deal of action happened in the price and volume of overstock. Stock surging more than 600% in almost 6 months and now tanking back again from 52-week high of $89.80 to current $29.90 levels. What’s really is going on? Is it worthwhile to look at this stock from bullish or bearish perspective, or pass on this stock?

What is Overstock.com’s Business?

(Taken from Q2FY2018 Financial Report)

Overview

We are an online retailer and advancer of blockchain technology. Through our online retail business, we offer a broad range of price-competitive products, including furniture, home decor, bedding and bath, housewares, jewelry and watches, among other products. We sell our products and services through our Internet websites located at www.overstock.com, www.o.co and www.o.biz. Although our three websites are located at different domain addresses, the technology and equipment and processes supporting the Website and the process of order fulfillment described herein are the same for all three websites.

In late 2014, we began working on initiatives to develop and advance blockchain technology, which we refer to collectively as Medici. As part of our Medici initiatives, we have formed a wholly-owned subsidiary Medici Ventures, Inc. (“Medici Ventures”) and acquired a majority interest in a financial technology company and two related registered broker dealers which are owned by our majority-owned subsidiary tØ.com, Inc. (“tZERO”). In 2015, we were the first public company to issue a private security using blockchain technology and in December 2016, as a demonstration of our technology, we issued publicly traded blockchain preferred shares of Overstock.com, Inc. Medici Ventures also holds minority interests in several blockchain technology companies. Medici Ventures has assembled a core blockchain development group of software engineers, developers, and other technologists that provide services to the blockchain community on a contract basis as requested, including the companies in which we hold a minority interest. In 2018, tZERO acquired majority-ownership interests in a registered investment adviser entity and an accredited investor verification entity and further purchased minority

interests in multiple financial services companies, including an equity interest in a joint venture with BOX Digital Markets LLC to pursue the development of the first U.S. security token exchange.

Our company, based near Salt Lake City, Utah, was founded in 1997. We launched our initial website in March 1999 and were re-incorporated in Delaware in 2002.

Our Business

Retail Business

In our retail business, we deal primarily in price-competitive, new and replenishable merchandise and use the Internet to aggregate both supply and demand to create an efficient marketplace for selling these products. We provide our customers an opportunity to conveniently shop for a broad range of price-competitive products. We continually add new, and sometimes limited, inventory to our Website in order to create an atmosphere that encourages customers to visit frequently and purchase products before our inventory sells out. We provide suppliers with access to a large customer base and convenient services for order fulfillment, customer service, returns handling, and other services. The merchandise offered on our Website is from a variety of sources including well-known, brand-name manufacturers. Consumers and businesses are able to access and purchase our products 24 hours a day from the convenience of a computer, Internet-enabled mobile telephone or other Internet-enabled device. Our team of customer service representatives assists customers by telephone, instant online chat and e-mail. We also derive revenue from other businesses advertising products or services on our Website. Our

sales are primarily to customers located in the United States. We have organized our retail business (sales of product offered through the Shopping Section of our Website) into two principal segments-a “direct” business and a “partner” business. Our retail direct business includes sales made to individual consumers and businesses from our owned inventory and that are fulfilled primarily from our warehouses in Salt Lake City, Utah and Carlisle, Pennsylvania. For our retail partner business, we sell merchandise from manufacturers, distributors and other suppliers (“partners”) primarily through our Website. We are considered to be the principal and control the specific good or service before it is transferred to the customer for the majority of these sales transactions and we record revenue from the majority of these sales transactions on a gross basis. Our use of the term “partner” does not mean that we have formed any legal partnerships with any of our partners. These third-party partners generally perform the same fulfillment operations as our warehouses, such as order picking and shipping; however, we handle returns and customer service related to substantially all orders placed through our Website. Revenue generated from sales on our Shopping site from both the direct and partner businesses is recorded net of returns, coupons and other discounts. Both direct and partner revenues are seasonal, with revenues historically being the highest in the fourth quarter, which ends December 31, reflecting higher consumer holiday spending. We anticipate this will continue for the foreseeable future. To the extent possible we maintain supplier relationships, and seek new supplier relationships, for both our direct and partner businesses, and also use our working capital, to ensure a continuous allotment of product offerings for our customers. Because a portion of our product offerings are closeout merchandise, some of our suppliers cannot supply products to us on a continuous basis.

Medici business



Our Medici business initiatives seek to leverage the security, transparency and immutability of cryptographically protected, distributed ledgers,such as blockchains, and are focused on solving important problems, including financial transaction issues, particularly in the areas of securities settlement, commercial blockchain applications, capital markets applications, digital currency, money and banking applications, compliance, personal identity, voting,

and property and land applications. Our wholly-owned subsidiary, Medici Ventures, conducts its primary business through its majority-owned subsidiary tZERO, which includes a financial technology company, two related registered broker dealers, a registered investment advisor, and an accredited investor verification company. tZERO also holds minority interests in multiple financial services companies, including an equity interest in a joint venture with BOX Digital Markets LLC to pursue the development of the first U.S. security token exchange.









Bullish Argument on Overstock.com

Flexible and Adaptable

The biggest benefit of being a smaller company is – flexibility and adaptability. Overstock utilized this flexibility and adaptability allowed it to be among the first retail company to adopt cryptocurrencies and blockchain technology into its business. At moment the bigger players like Walmart and Amazon are still investing and developing the blockchain technology for their business.

Portfolio Structure

Overstock.com has built a strong investment portfolio in the blockchain space of both licensable technology and cryptocurrency holdings. Couple this, with the companies strong footing in the e-commerce space, in which it has competed with Amazon for many years. As a major player in the fast-growing e-commerce space, this provides the company with stability in terms of cash flow (however, this section is under pressure because of increased marketing expenses).

Marc Cohodes providing the Target Price of $150-$500 for Overstock based on Sum Of Total Parts (SOTP) based Valuation approach using Crypto Venture Capital Division, E-commerce Business and the Cash in Hand.

Growth of Medici Operations

For the time being, Overstock.com’s Medici Business has thus far been a capital drain. The long-term success of any venture capital remains uncertain. The Return on Investment (ROI) for Venture Capital varies drastically. The successful ventures in the portfolioneeds to make up high enough for the amount VC has lost in order to have good ROI/Success of the VC’s Business. This segment takes time to play out.

However, a windfall success or outside-acquisition of any one of the Medici Venture Capital portfolio companies, could prove to be very profitable and a valuable blockchain/crypto asset. If the concepts proves to be successful then the exit by Medici will provide multifold returns on its investment. Being the technology of the future, we believe it is not hard to sell the unsuccessful businesses and getting at least something in return as compared to otherwise cases where usually nothing gets recovered.

TZero – The Trump Card of Overstock

Just recently, Overstock’s tZero Wraps Up Months-Long Token Sale. The company initially introduced the Security Token Offering (STO) in the form of an Initial Coin Offering (ICO) in December last year. In June 2018, tZERO signed a letter of intent with Beijing-based investment company GSR Capital for the purchase of $160 million in tZERO Security Tokens at a price of $10.00 per token. In addition to the STOs, tZERO also “entered into executed SAFEs (Simple Agreements of Future Equity) in excess of $168 million for Security Tokens, of which over $95 million had been already funded.” As per many investors, this possess the biggest potential of growth by Overstock. The Q2 FY2018 Earnings commentary by management was very optimistic for tZERO.

Some of the slides include:

Below we have a product roadmap for the tZERO token. We believe that the timeline provided belowfor the tZERO work progress is a bit aggressive. As such, not all of the mentioned timelines have been followed. Nonetheless, good things always take more time than previously anticipated.

Bearish Argument on Overstock.com

Stay tuned for tomorrow, when we will be posting Part 2 to this Overstock.com (OSTK) stock analysis, which consists of the Bearish Argument on Overstock.com (OSTK) and Conclusion:









Disclaimer