GSR Capital finally closed on its investment in tZERO, which is the security token trading platform of Overstock.com, after several months of revisions and delays to the deal. Rather than buying $30 million of tZERO tokens, which was agreed previously, the private equity fund of Hong Kong has invested only $5 million in tZERO equity, in the traditional form. Then, the finalized transaction has valued tZERO at $1 billion, which is less than the $1.5 billion in the initial agreement.
The long negotiations finally closed
The CEO of Overstock has announced the news on Thursday morning during the Q1 earnings call of the company, adding that they are letting the GSR out of all the previous contracts.
Makara Capital, which is a Singapore fund which was brought into the deal by GSR, still conducts its due diligence of tZERO, and may even invest the money it pledged earlier, according to Overstock.
The Q1 earnings report of the company said that they still work with Makara Capital and they feel optimistic that something may be consummated with them, and GSR can join in again at that point.
Despite the sharp proceeds reduction, the CEO of tZERO, named Saum Noursalehi, said that the $5 million investment has been a decent offer. The investment actually consists of $1 million in the United States dollar, $1 million worth of Chinese Renminbi, and about $3 million value of specific other securities, according to the statements of Overstock.
The original deal with GSR has been announced in the summer of 2018, and it was expected to bring about $404 million to tZERO; however, it was postponed a few times and downsized to $100 million in March, and then to about $30 million in April.
In March, right when the deal has been postponed for the second time in a row, GSR brought in Makara. The two firms have been supposed to co-lead the $100 million investment in tZERO.
Because tZERO hasn’t obtained as much external investment as it actually hoped for, it is going to rely on cash from its parent company: earlier plans about selling Overstock.com online retail business have also been postponed. According to Noursalehi, the retail business has quite a bit of capital, and they start being cash flow-positive.
To raise some additional capital, Overstock sold several of its stock in recent times, and he said that not that it all is going to go to tZERO, but if it needs money, those funds can actually get pushed down to it from the parent company.
This particular funding served as the king of hedge against the uncertainty in the deal between Makara Capital and GSR, according to Noursalehi.
The progress of blockchain
However, on the brighter side, tZERO appears to have found a new big client in order to issue security tokens on its platform. As Noursalehi stated, Emaar, which is a real estate giant based in Dubai, signed a letter trying to issue tokens on tZERO. Emaar own some luxury residential, as well as commercial high-rises, including the tallest building in the world, the well-known Burj Khalifa located in Dubai.
Emaar announced its plans about doing an ICO in March, establishing a partnership with Lykke AG, a startup from Switzerland. First of all, Emaar is going to do some initial small, PoC or proof-of-concept issuance to prove it out, according to Noursalehi, even though the company looks into launching a token issuance project of $2 billion in the following several years. There isn’t a timeline or some other detail of the future deal, according to the CEO of tZERO, but they want to get a definitive contract in the following week or even two.
One car manufactures which was previously mentioned, the Elio Motors, was also working on a token issuance with tZERO, and is not going to be among the primary issuers on the platform, according to Noursalehi.
Another partnership has also been announced during the earnings call: in this particular month, tZERO has some plans to complete integration with another tokenization platform, the so-called Securitize. According to the CEO of tZERO, the team of his company is going to conduct due diligence of the tokens which are issued on Securitize and pick some of them so that they could trade on the ATS.
Overstock moving shares to tZERO
Meanwhile, Overstock moves some of its own shares to tZERO, a plan which it notified shareholders about in recent times. These shares, which are called Blockchain Voting Series “A” Preferred Stock, have been issued in 2016 as the initial PoC for the future token trading platform.
Another ERC-20 token, which is known as OSTK.0 already exists on the ETH blockchain, but there aren’t transactions recorded on it yet. The shares are going to be live on tZERO in June of this year, according to the company.
Overstock also has some plans to issue more tokenized shares. Ultimately, the company could also go full blockchain according to tZERO’s CEO, concluding that long term down the road, they can ultimately de-list from NASDAQ and have all of their stock on tZERO. However, before that even happens, it obviously is going to have to be a much more liquid market than it is nowadays.