Patrick Byrne, the CEO of Overstock, believes a market boom for its security trading platform tZERO lies just around the corner.
Speaking to CoinDesk in an interview Wednesday, Byrne said he expected volumes to soar after the year-long lock-up period for the tZERO Preferred (TZROP) token ends in August and the platform opens up to retail investors to register and trade. Right now, only accredited investors can do that.
So far, the daily volume on the platform has been fluctuating between 7,000 and 30,000 units of TZROP – the sole listed asset for now. At current prices, that amounts to less than $200,000 a day, hardly Nasdaq levels.
Still, Byrne is planning additional updates that will help boost liquidity on the exchange, first envisioned in 2014 as a kind of alternative stock market and now realized as an alternative trading (ATS) system for crypto tokens. Specifically, tZERO is also looking into getting more broker-dealers to work with, other than Dinosaur Financial Group, which is maintaining the trading exclusively now.
“I’m looking forward to you writing, ‘they’ve gone from 30,000 tokens to 300,000 tokens a day,’” Byrne told CoinDesk.
However, to introduce new broker-dealers, tZERO will have to get approvals for each one with the U.S. Securities and Exchange Commission (SEC), Byrne said, which could slow down the process.
Byrne told CoinDesk:
“FINRA and SEC made it clear that they want to see this work with one broker. We’re into an incremental disruption, not like you millennials that want everything burned down tomorrow.”
tZERO, the favorite child of Overstock and its subsidiary Medici (which owns 80 percent of tZERO), is led by former executives of the Overstock-Medici team: CEO Saum Noursalehi, who previously was the president of Overstock, and president Steven Hopkins, who used to be Medici’s general counsel and COO.
Medici’s team in general is actively involved in helping the portfolio companies to strengthen the weak parts and lending its staff when needed, Byrne told CoinDesk. For example, Medici’s team of developers has been helping some startups with technical expertise, while different specialists helped build business operations, he noted.
“At Medici, there are different kinds of talent, and we’re pushing it to the companies as they need it,” Byrne explained. “A lot of these companies are young kids with an idea and maybe some money, but not much more. And they haven’t built a company: they don’t have lawyers, HR people, they might not even have senior engineers.”
But that’s a challenge faced not only by Medici’s holdings but by the industry this 57-year-old CEO has embraced. As he put it:
“People in blockchain are used to building sort of little science experiments. They don’t know how to build something that a million of people are going to use.”
Stumbling blocks
In the meantime, two important deals that are supposed to boost tZERO and the entire Medici portfolio with cash seem to be stumbling so far.
The first one is the sale of the online retail business, Overstock.com, announced in November and expected to get finalized by February. Asked if the process was advancing in any way, Byrne told CoinDesk that he’s “running the business as if I’m going to own it forever.”
Although “there is a process going on” regarding the projected sale, Byrne won’t say more but promises an optimistic future for the online retail business.
“We’re switching from the conventional internet strategy of growing and losing money, and we will have a positive cash flow in retail this year,” he said.
Another important deal for tZERO that seems as though it could be delayed is the one with the Hong-Kong-based firm GSR Capital that was going to invest up to $404 million in Overstock and tZERO, announced at the end of last year.
In December, GSR asked for an extension to close the deal, and the deadline was moved to Feb. 28. Asked about the status of the deal on the stage of the Oppenheimer Blockchain Summit in New York Wednesday, Byrne said that the two parties “have been staggering over the documents,” refusing to go into details.
Even if Overstock ends up keeping the retail business a little longer than expected, the company has already evolved into a blockchain play in investors’ minds. Since Byrne became actively involved in the space a few years ago, Overstock’s image has become closely connected to the cryptocurrency market, even though the company never announced large investments in crypto.
Overstock’s shares, which fell throughout 2018, followed the crypto bear market. Byrne says that according to the Overstock team’s estimate, the price of the stock is now 87 percent correlated with the price of bitcoin.
“Clearly people are confused. We don’t own significant bitcoin,” he said.
Patrick Byrne, CEO of Overstock, at the Oppenheimer Blockchain Summit, photo by Anna Baydakova for CoinDesk.