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ing and underdelivering. In 2016 Byrne told investors that Overstock
would issue the world’s first equity security using blockchain. Byrne
ended up buying 50% of the $2 million preferred stock offering himself.
In 2017, Byrne announced a joint venture with Peruvian econo-
mist Hernando de Soto Polar that would “challenge global poverty
and inequality” by creating a blockchain-based global land registry.
But when the two couldn’t agree on terms, Byrne ended up contrib-
uting $7 million of his own capital to take a 43% stake in the newly
formed Medici Land Governance.
Overstock began exploring a sale of its retailing business in 2017,
but no buyers have materialized. There was also Tzero’s troubled “ini-
tial coin offering,” which set out to raise $250 million but, ultimately,
as crypto prices slid, generated $105 million in August 2018 at an ex-
pense of $21.5 million to parent Overstock. The offering is now being
investigated by the SEC as part of a broader ICO crackdown.
Many investors got fed up. “Basically, every initiative they put
forward, they promised or signaled to the market that this is an in-
credible layup and they will get it done in three to six months,” says
Kevin Mak, a lecturer at Stanford Business School who invested in
the company in 2017 and sold his shares in late-2018. “I ultimately
exited when I found that the information I was getting from man-
agement was no longer—I want to pick the right words—reliable.”
In the end, Byrne was forced to spend considerable time hunting
for fresh funds. In November 2017, Overstock borrowed $40 mil-
lion from his mother (trusts in her name own 5% of the company)
and brother at an interest rate of 8%. Over the next few months, at
the height of crypto-mania, the company received $150 million from
two investors, including George Soros, after they exercised warrants
in exchange for stock (the investors have since sold their shares). In
August and September 2018, the company raised another $95 mil-
lion by issuing common stock in an “at the market” offering.
Selling equity has heavily diluted Overstock’s stock. Shares outstand-
ing have climbed to 38 million from 25 million in the last two years. In
the first quarter of 2019 Overstock committed to another quick stock
sale, raising $31 million to partially offset a $51 million cash burn.
Meanwhile, Overstock’s original business is running on fumes. “It
was kind of a fight to run retail, because it was never his priority,”
says Stormy Simon, former president of the operation, who left in- Since then, there have been several rounds of layoffs in the
retail business. And yet, to his blockchain staffers, Byrne was like
Daddy Warbucks. Tzero CEO Saum Noursalehi was paid $4.8 mil-
lion in 2018, while his brother and Tzero vice president Nariman
earned $1 million. Tzero chief technology officer Amit Goyal made
$1.8 million—and his brother Sumit earned an additional $765,000.
In recent quarterly filings, Overstock indicates that it should be
able to fund current obligations for at least another 12 months, but
that additional capital may be needed “to be able to fully pursue
some or all of our strategies.” The disclosure seems to have had little
effect on Overstock’s shares, because by now many investors have
given up on the company.
Byrne never showed much respect for Wall Street or sharehold-
ers—which may be what got him in the end. “We’re like a Russian
icebreaker trolling across the Arctic ice field. It’s three or four yards
at a time and enormously expensive,” says Byrne. “When you’re talk-
ing about the kinds of numbers we’re talking about and freeing up
trillions of capital... I think there is going to be so much money in
it, it’s kind of silly to try and model it.”
Before long, Byrne began tapping Overstock’s
balance sheet to fund bigger and bigger block-
chain initiatives. The crown jewel: a digital stock
exchange called Tzero, which is seeking to allow
investors to trade so-called security tokens that
represent traditional securities on the blockchain.
Proponents say this will improve access and li-
quidity for certain investments, plus cut settle-
ment times for stocks and bonds from up to two
days to mere seconds. A bonus: The system would
make naked short-selling impossible by eliminat-
ing the lag time between a buy and sell order.
Tzero has satisfied a set of fearsome regulatory
requirements, most notably acquiring a company
licensed as an alternative trading system. But with
just a handful of tokens—including those that rep-
resent Overstock’s and Tzero’s own shares—avail-
able to trade on Tzero’s platform, few people use
it. In May, it announced partnerships with Dubai-
based real estate giant Emaar Properties to list $2
billion in real estate, and Securitize, a startup that
packages regular assets into digital tokens that
can be traded on the blockchain. While it hopes to
generate revenues from listing fees, trading com-
missions, interest on lending assets and more, it
first needs to create liquidity by attracting quality
issuers and investors to its platform.
Byrne was also developing a securities lending
platform as part of Tzero, which would connect
asset-rich institutional investors like pension funds
(who make money by lending their stock) direct-
ly with short-sellers (who borrow stock to make
trades). Both parties stand to benefit from lower
fees, and would receive a blockchain-enabled digital
locate receipt that proves the shares have actually
changed hands. The service takes dead aim at banks
like Goldman Sachs and Morgan Stanley, which
currently sit in the middle of these transactions.
“It’s the last great business on Wall Street,” says
Byrne. “Pension funds are going to understand
they have been deprived of tens of billions of earn-
ings a year. That money is turning into Maybachs
in the Hamptons.”
t the company’s annual share-
holder meeting in May, Byrne
fielded tough questions. While the
price of bitcoin had climbed 60%
in the previous five months, Over-
stock’s shares were sliding. And after months of
delays, Overstock dropped a bombshell: despite
having touted a deal of as much as $404 million,
Tzero would receive a measly $5 million in the
form of Chinese renminbi, U.S. dollars and other
Hong Kong-traded securities from Asian invest-
ment firm GSR Capital.
Byrne developed a reputation for overpromis-
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