What happened
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Overstock.com (NASDAQ: OSTK) — the one-time Amazon wannabe that’s since become a play on digital currency — revealed that it wants to get out of the retail business and go all-in on blockchain instead.” data-reactid=”12″>Overstock.com (NASDAQ: OSTK) — the one-time Amazon wannabe that’s since become a play on digital currency — revealed that it wants to get out of the retail business and go all-in on blockchain instead.
Investors cheered. Overstock stock is up 12.7% as of 1:55 p.m. EDT on Friday, and at one point was up more than 20%.
Image source: Getty Images.
So what
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="CNN is reporting that Overstock CEO Patrick Byrne made the revelation yesterday at the Fortune Brainstorm Finance conference in Montauk, N.Y. Said Byrne, "Two very attractive acquirers that I would have put high up on my list have shown up" with offers to buy Overstock’s e-tailing business — although he wouldn’t say who those bidders were, or how much they were offering to pay.” data-reactid=”27″>CNN is reporting that Overstock CEO Patrick Byrne made the revelation yesterday at the Fortune Brainstorm Finance conference in Montauk, N.Y. Said Byrne, “Two very attractive acquirers that I would have put high up on my list have shown up” with offers to buy Overstock’s e-tailing business — although he wouldn’t say who those bidders were, or how much they were offering to pay.
What Byrne did imply was that on his side of the equation, Overstock is a pretty motivated seller. “There’s no point in trying to compete [in retail anymore]. It’s way too expensive,” said Byrne.
So instead, Overstock wants to jettison the retail business that provides 99% of its revenue and focus on blockchain technology full time, with Byrne saying he thinks his company can make $20 million in earnings before interest, taxes, depreciation, and amortization (EBITDA) this year.
Now what
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="To do that, Overstock may have to get out of retail. The company is struggling to compete with better-run and better-funded retailers, and S&P Global Market Intelligence data show that Overstock has posted negative EBITDA margins for two years running.” data-reactid=”31″>To do that, Overstock may have to get out of retail. The company is struggling to compete with better-run and better-funded retailers, and S&P Global Market Intelligence data show that Overstock has posted negative EBITDA margins for two years running.
In fact, though, even abandoning retail and focusing 100% on blockchain may not be enough to save the company. Although Byrne argues that “our earnings have turned,” the company’s Tzero token trading systems business has grown its revenue only 25% over the past two years — and sales declined last quarter. Trailing revenue shows Tzero brought in less than $19 million over the last 12 months — after the company spent $150 million building Tzero.
It makes an investor wonder if maybe Byrne is selling the wrong part of Overstock’s business.
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