The American online discount store Overstock.com (NASDAQ: OSTK) is issuing a blockchain-based stock.
Trading of Overstock shares on the tØ blockchain platform began on December 16 and attracted very little attention, Coindesk reported. Only a few people visited the site during its first day of operation.
Despite that Overstock claimed to have sold 126,565 shares of stock worth $1.9 million via the tØ platform, Coindesk reported. Around 55 people bought the shares through the platform which is owned by Overstock but operated by Keystone Capital. The tØ was developed by an Overstock subsidiary called Medici.
tØ is the latest attempt by Overstock CEO; and bitcoin enthusiast, Patrick Byrne, to bring more transparency to investment. His new stock is designed to be easier to audit than traditional equities. He hopes that will discourage speculation and shady deals. Byrne has long been an outspoken critic of Wall Street and the financial system in general.
An Alternative to Wall Street
Like a number of blockchain promoters Byrne thinks he can improve the financial system. His goal is to eliminate the middlemen in financial transactions and reduce the costs. A long term goal is to create a blockchain-based capital market to replace or supplement Wall Street.
Byrne thinks there’s been a shortage of initial public offerings (IPOs) in America because of price manipulation on stock exchanges. He believes entrepreneurs are too afraid of equities because of price manipulation. Despite that Overstock still trades on the NASDAQ stock exchange in the United States.
Overstock is an online discounter and reseller of merchandise other retailers cannot sell. This is known as the close out business in the United States. It operates a platform that is a sort of bargain basement competitor to Amazon.com (NASDAQ: AMZN) in the United States.
Overstock is a fairly small company which reported incomes of $1.754 billion and a net income of $9.537 million on September 30, 2016. Its stockholders did receive a 6.05%, return on equity on September 30, 2016. The company’s business model is a questionable one, it reported a profit margin of -.7% and a free cash flow of -$4.99 million on September 30, 2016.
Walmart is a Threat to Overstock
One problem that Overstock faces is aggressive competition from the world’s largest discounter Walmart (NYSE: WMT). Walmart has been ramping up its online efforts lately and it has been undercutting some of Overstock’s prices and offering free two-day delivery through its Shipping Pass program. Walmart also acquired another relentless online discounter Jet.com in August in an attempt to expand its ecosystem.
Overstock might not be a good investment but blockchain-based financial markets might be. Unfortunately it will face aggressive competition from bigger and better-financed rivals in that arena as well.
A number of financial institutions including America’s largest bank, JPMorgan Chase (NYSE: JPM) is experimenting with a similar product. A consortium of banks that includes Bank of New York Mellon (NYSE: BK) and UBS (NYSE: UBS) is planning to launch its own blockchain-based currency; and some central banks are experimenting with cryptocurrencies.