Alternative trading system tZero is struggling to stay afloat. In a letter to its investors, CEO Saum Noursalehi announced that tZero has “significantly reduced [their] expenses. [tZero’s] run-rate on cash burn is down almost 45% year-over-year.”
Noursalehi confirmed that the company has already reduced “headcount and legal costs,” and several of its leaders have “accepted cash salary reductions and received additional equity compensation.” For his part, Noursalehi said he has cut his salary by 50%, noting that tZero’s “board members are also now only compensated with equity.” It’s unknown how many staff members tZeo has laid off.
How does tZero make money?
Although tZero prides itself on being the platform that accounts for “approximately 95% of security token trade volume,” there are hardly any security tokens on the market. Even the tZero platform only has two security tokens that trade on it: tZERO’s own private equity token, TZEROP, and OSTKO Overstock’s digital voting series A-1 preferred stock.
tZero opened its doors to retail investors in 2019, but the company reported a poor financial performance in 2019, with a net loss of $10 million in Q2 2019. Even in Q1 2020, tZero only reported a meager profit of $76,000.
tZero is looking to list a third security token on its platform in the near future, but if the past is any indication of the future, then when tZero lists their third security token, the ASPEN token—the digital currency for the Regis Aspen Resort—it will most likely be underwhelming.
The general public has not expressed significant interest in investing in security tokens, which is why we see poor financial reports from tZero quarter after quarter. With the recent reduction in expenses from tZero, current and potential investors are likely to become wary of tZero and may even be deterred from investing in the company.
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