Overstock.com Inc (NASDAQ:OSTK) offers an extremely interesting laboratory for supposition and market conjecture right now for one very important reason: the stock blasted off on Friday’s shortened session to close out last week, logging nearly 30% in gains on the day following a report in the Wall Street Journal wherein the company’s often controversial CEO, Patrick Byrne, told reporters that he was planning on divesting the company of its entire retail business to make it a thoroughgoing blockchain bet.
There are a number of reasons to think long and hard about this move and weigh its consequences, not least of which has to do with questions about the future of this stock, itself.
Overstock.com Inc (NASDAQ:OSTK), after all, has been a retail sales company for decades. It has never been a particularly strong name in that space, carving out a few moments here and there of buzz-worthy success, but mostly as a gimmicky play on inefficiencies in the primary sector’s logistics systems. As logistics have become increasingly efficient in the past ten years, the company’s raison d’être has become decreasingly promising, which may be part of why we have seen such a fervent flight to the buzz of blockchain.
That said, by all accounts, Mr. Byrne is widely believed to be an avid blockchain guy – a “true believer”.
There are those who would characterize him, though, as also “more full of crap than a ribfest port-o-john” and an avid PR strategist who regularly uses the device of shortsellers to explain away declining market valuation for his company – a common explanatory device employed by CEOs of companies that have regularly experienced deep questions about the viability of an enterprise.
In any case, the main point we wish to make here is this: can this latest gambit work? We think it has a chance. And here’s why: Timing.
Mr. Byrne just happened to make these comments after Bitcoin broke down out of a very long-developing bearish descending triangle pattern, slaughtering the crypto space another 30-40% after it had already been down 75-80% on the year. It has been a devastating decline. But it also may well be in the process of capitulating the bear market and forming some kind of bottom.
If that is true – ie, if OSTK divests its retail arm and plows the proceeds into the blockchain/crypto segment just as the bitcoin bear market comes to an end, thereby taking in both a windfall from the divestiture and massively increasing its ROI on that capital – then this stock could be a suddenly very exciting opportunity, and Mr. Byrne – snake oil and all – may pull off a truly extraordinary turn of trick.
Carved on the Wall
Overstock.com Inc (NASDAQ:OSTK) bills itself as a an online retailer and technology company based in Salt Lake City, Utah.
It’s leading e-commerce website sells a broad range of new products at low prices, including furniture, décor, rugs, bedding, home improvement, jewelry, and more. The online shopping site, which is visited by nearly 40 million customers a month, also features a marketplace providing customers access to millions of products from third-party sellers.
Overstock was the first major retailer to accept cryptocurrency in 2014, and in the same year founded Medici Ventures, its wholly-owned subsidiary developing and accelerating blockchain technologies to democratize capital, eliminate middlemen, and re-humanize commerce.
Overstock.com Inc (NASDAQ:OSTK) managed to rope in revenues totaling $440.6M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top-line growth of 3.9%, as compared to year-ago data in comparable terms.
In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($186.5M against $234.4M, respectively).