CNN Business: Overstock CEO Works to Sell Business, Efforts Are “Heating Up” to Go Full Blockchain
- Overstock’s sale of the retail business was delayed after an SEC inquiry.
- CEO Patrick Byrne said that there are at least two interested buyers now.
The journey for Overstock to break into the blockchain technology industry has been interesting, to say the least. Unfortunately, this journey was met with roadblocks last year, though recent reports from CNN Business suggest that the work put forth to sell the business are becoming a little more intense, based on discussion with CEO Patrick Byrne.
Selling the retail business would mean that Overstock is left only to work as a blockchain-focused brand, which would also come with a new name. On Thursday, the Overstock CEO stated that there are “two very attractive acquirers” that he’s been watching have now “shown up.” He believes that the newfound interest is due to the fact that the company’s “earnings have turned.” Soon after these statements, the share value for Overstock leapt by 15%.
In May, Overstock had predicted that this year would result in $15 million in adjusted earnings, though that amount does not account for interest, taxes, amortization, depreciation, or EBITDA. Now, Byrne has changed his prediction, suggesting that the actual figure will be $20 million. He added, “People will be shocked at how quickly we can return” to that level of profit. Analyst Bill Baker with GARP Research believes that the retail business could end up being worth $100 million.
Considering how much the blockchain industry has growth, Overstock decided to leave the competitive nature of retail behind for an opportunity with more growth. In the past, Byrne had spoken with CNN Business, saying that competing in retail is “way too expensive.”
At this point, the main issue standing in the way of Overstock’s retail business is an SEC inquiry back in March 2018 into tZERO. tZERO is the crypto-focused side of Overstock. Byrne believes that this inquiry “destroyed the auction,” adding that one or more of the bidders almost immediately backed off. With any SEC issue pending, the sale of a company becomes substantially more difficult.
The letter from the SEC required voluntary cooperation from Overstock, and Byrne states that the company complied. In fact, Overstock spent $13 million in the process to ensure that they quickly responded to the questions, due to hiring 100 lawyers to work through the Memorial Day weekend. Unfortunately, the shareholders also ended up paying “a fortune.” In total, the SEC received 2 million documents from Overstock, though Byrne declined to speak any further about the inquiry, since everything is in the agency’s hands now.
The interested buyers include retailers that could take advantage of the logistics system that Overstock has in place, helping them speed up deliveries. Byrne explained, “Some brick-and-mortar companies that have underinvested in technology and sat out the internet revolution are now hopelessly behind.” There are also buyers involved that are working to monetize the web traffic, like social media platforms.
Regardless of who ultimately decides to purchase the retail business, Wall Street isn’t very patient. In fact, even though the company’s shares were worth $43 in July last year, the shares have since lost over 75% of their value in the last year. Byrne believes that their decision to change up their strategy, opting against outspending Wayfair, saying that it was
“stupid for me to outgun them.”
If Overstock manages to sell their retail side, Byrne confirms that Overstock would be changing their name, though he did not reveal the new name.