Overstock’s tZero loses $400M investor amid revenue, profit slide

A Hong Kong investment fund which had signed up to a $400 million investment in Overstock’s tZero exchange platform, will now exit the deal with just $5 million in tZero equity, according to reports.

GSR Capital had been scheduled to buy $30 million in tZero tokens, at a valuation that would price the company at $1.5 billion. On Thursday, however, Overstock CEO Patrick Byrne announced that the fund has exited the deal, taking $5 million in traditional equity in the company at a valuation equivalent to $1 billion.

The withdrawal of a key investment partner in GSR Capital is a significant blow for tZero, with others investments also now in the balance.

In its Q1 earnings report, the firm said there was still hope that some, if not all of the investment could go ahead as planned. Byrne said, “We are still working with Makara and feel optimistic (but not certain) that something can be consummated with them (and GSR may join in again at that point).”

The developments come as the result of delays and technical issues in bringing the project to life, and follows several incremental downgradings in the size of investment pledged by GSR.

Plans to sell the parent company’s retail business have also hit the buffers, leaving the firm struggling to meets its previous funding targets.

Overstock has sold equity in a bid to raise funds with a view to pushing the money down to its tZero subsidiary as required. Yet the failure of the existing investments to materialize is still a significant financial blow to the exchange project.

The news comes at the same time as Q1 figures for the firm show Overstock revenues to have fallen by a whopping 17% year on year, from $445 million to $367 million.

According to figures in its Q1 2019 earnings report, this was accompanied by a 22% drop in gross profits, and a total loss for the year so far $15.4 million in Q1.

Byrne said in the earnings report that he expects the firm’s platform to be ready for public use as early as this month. The hope now will be that the launch can help the firm recover this lost ground.