In an unusual open letter to investors, the CEO of e-commerce turned crypto company Overstock outlined reasons for shareholders not to worry that he recently dumped 10 percent of his shares.
“I’ve cashed in 1/10 of my chips (most of it, to reinvest next to you),” Overstock Founder and CEO Patrick Byrne said in letter to shareholders this week. “Don’t worry, I’m still in the game, and we’re going to bring this House to its knees.”
Byrne sold more roughly $15.8 million worth of stock based on last week’s prices on Thursday and Friday, and $4.9 million worth on Monday, according to a form 4 SEC filing. Total, the CEO has offloaded about $20 million in stock in the past week — in the same time frame share price has fallen 12 percent.
Byrne, who signed the letter “your humble servant,” first disclosed plans to sell stock in a March SEC filing. He said the proceeds would “fund sidecar investments with the company,” and are mostly being used to reinvest in Overstock and its subsidiary Medici Ventures.
“Thus, I am eating a double dose of my own cooking, as months ago I promised you I would,” Byrne said.
The Salt Lake City-based online retailer is best known for selling products like furniture, home decor and jewelry. But the company is also moving aggressively into the blockchain space. Overstock launched its Medici Ventures division in 2014 to oversee those blockchain investments and Byrne has said he plans to reorganize or sell the e-commerce business to focus on the technology underpinning bitcoin.
Wall Street so far, is not convinced. The stock was slightly higher Tuesday but is down 61 percent this year. Byrne blamed part of that on struggling cryptocurrencies.
“I sadly note that over the last 180 days the correlation between OSTK’s and Bitcoin’s daily movements has been 85.5%, and again warn people: we don’t have significant holdings of Bitcoin,” he said.
Overstock shares briefly surged 21 percent in August after the retailer announced that Hong Kong private-equity firm GSR Capital will invest up to $270 million into its blockchain subsidiary tZero. The investment will be made at a valuation of $1.5 billion, giving the private equity firm an 18 percent stake in tZero.
Overstock.com’s subsidiary tZero said in late September it would form a joint venture to start a digital coin exchange and the company has said it has a license for an alternative trading system through another acquisition.
The Securities and Exchange Commission announced earlier this year it is investigating the firm for its cryptocurrency-focused subsidiary’s sale of digital tokens. Overstock said in February that the agency requested “certain documents related to the offering and the tokens in connection with its investigation,” according to an 8-K filing with the commission.
U.S. regulators have increased their scrutiny of sales of new digital tokens, or initial coin offerings. The fundraising method has brought in $11.3 billion this year alone, according to data from financial research firm Autonomous Next. Total ICO fundraising nosedived in August though to its lowest since May of 2017.
Byrne said in the 18 years at the company, he as only ever sold a “tiny sliver” of stock and for most of those years did not draw a salary.
“For the last several, have drawn $100,000 so as to avoid being one of those schmucks who does not draw a salary,” he said in the letter.
Byrne also pointed to needing to “pay Uncle Sam,” seemingly to meet tax obligations.
“Remember, I didn’t build this. Washington built this,” the CEO said.
Here are Byrne’s six reasons for selling:
1) Within a matter of days, I will reinvest most of this money into two co-investments with Overstock and Medici
Ventures (thus I am eating a double dose of my own cooking, as months ago I promised you I would).
2) You will soon see me honor several professors from my distant past who should not be asked to wait any longer.
3) I have to pay Uncle Sam his cut. Remember, I didn’t build this. Washington built this.
4) I feel very encouraged by the speed of improvements in our retail business (which also makes me comfortable taking this moment to sell). I also think the Medici Ventures business model is playing out beautifully, and we are getting to park your capital in some of the most exciting blockchain innovations in the world, coupled with the tech and corporate support that is making Medici Ventures a sought-after capital partner.
5) As was announced six months ago, I needed to sell stock during this quarter to meet such other obligations. I am disappointed that I when the deadline arrived for my sales this quarter, the stock had dropped (I sadly note that over the last 180 days the correlation between OSTK’s and Bitcoin’s daily movements has been 85.5%, and again warn people: we don’t have significant holdings of Bitcoin).
6) In the 18 years I’ve worked here, I have only ever sold a tiny sliver of my stock before (and that was 10 years ago, in the midst of my Mitzvah with Wall Street, when I wanted to test the system). Most of these 18 years I did not draw a salary (and for the last several, have drawn $100,000 so as to avoid being one of those schmucks who does not draw a salary).