GSR Capital Closes Investment On tZERO, Following Constant Delays And Changes Over The Last Few Months
- GSR Capital completes investment commitment to tZERO, despite many contractual changes.
- The decreased investment has caused Overstock to delay the sale of their online retail business.
Overstock.com c+2+reated a security token trading platform called tZERO quite a while ago. Though consumers have the option of purchasing the tZERO tokens, GSR Capital decided to take their commitment a step further. Though the deal took months of changes and delays, the company has finally closed an investment with the company.
The original deal outlined stated that GSR Capital would purchase $30 million worth of tZERO tokens. However, the agreement eventually evolved into investing in the equity of tZERO with $5 million in a more traditional commitment. By the time the transaction was finalized, tZERO had a valuation of $1 billion, even though the original agreement showed a value of $1.5 billion. CEO Patrick Byrne of Overstock.com announced the investment at the Q1 earnings call for the retailer this morning, saying that GSR is now related from “all previous contracts.”
Another investment that has been in the works has been with Makara Capital, which GSR brought into the deal. At this point, they are still conducting research into tZERO, but there is a good chance that the previous investment commitment will still be followed through. In the Q1 earnings report, the company said that they were still working with Makara right now, but they believe the investment will ultimately come through. The investment is comprised of $1 million in USD, $1 million in the Chinese Renminbi, and $3 million in “certain securities,” as Overstock writes.
The original deal with between GSR and Overstock was supposed to bring in $404 million for tZERO. However, the multiple changes and postponements ultimately brought down the investment to $100 million in March, which is when GSR brought in Makara to the deal. The $100 million investment was supposed to be shared between the parties, but it eventually dwindled down to $30 million by the following month. As of April, since the original investment arrangement, the total loss in commitment is over 90%.
Now, without the external investment that tZERO expected, it will most likely rely on the cash from Overstock.com. Plans to sell off the Overstock.com business was postponed, due to the need for capital and to have consistent cash-inflow. To bring in more capital, Overstock had recently sold some of its stock, though not everything is meant to go right to tZERO. Instead, it will act similar to a hedge while the uncertainty of the GSR-Makara deal is resolved.
Even with all of this conflict, tZERO may have a saving grace in the form of an investment from Emaar. Emaar, a real estate giant that is based in Dubai, signed a letter of intent that they plan to issue tokens on tZERO, adding that they’ll be doing an initial coin offering (ICO) with the help of the Lykke AG startup in March. However, there have been no additional details released by Emaar or Lykke.
With multiple deals in motion, Overstock has already moved some of their shares to tZERO, which are known as “Blockchain Voting Series A Preferred Stock.” The shares are planned to go live on the platform in June, though Overstock expressed that they will issue more tokenized shares in the future, according to tZERO CEO Saum Noursalehi.
“Long term down the road, we may ultimately delist from NASDAQ and have all our stock on tZERO. But [before that can happen] it obviously will have to be a much more liquid market than it is today.”