Overstock.com is looking to forge ahead with its bold plans for “cryptosecurities”, first announced last summer, detailing its plans in a recent filing with the US Securities and Exchange Commission (SEC).
The filing consists of a prospectus for its “shelf” registration of up to $500 million of securities in the company. Shelf registrations allow companies to market multiple offerings of its securities without requiring a prospectus each time. Overstock is looking to issue common stock, preferred stock, depositary shares, warrants, debt securities or units.
Significantly, “digital securities” may be part of the mix. The prospectus explains:
“We may decide to offer securities as digital securities, meaning the securities will be uncertificated securities, the ownership and transfer of which are recorded on a cryptographically-secured distributed ledger system using technology similar to (or the same as) the distributed ledger technology used for trading digital currencies.”
Overstock’s CEO, Patrick Byrne, has been a vocal supporter of cryptocurrency, his company accepting bitcoin for payment early last year. Unlike many merchants, the company actually retains a portion of accepted bitcoins without converting them to fiat. Several months later, Byrne first floated the concept of a cryptosecurity and indicated that regulatory engagement will be key.
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The prospectus illustrates how its cryptosecurity can work:
“For example, we may decide to offer shares of our capital stock as digital securities, in which case the shares of stock would be the same as any other shares of the same class of stock except that such shares would be uncertificated and represented exclusively as book-entries on a cryptographically-secured distributed ledger.”
The blockchain-based venue for the trading of such securities would fall under the category of alternative trading systems (ATS), as opposed to traditional avenues such as the New York Stock Exchange (NYSE) or NASDAQ.
The prospectus points to several risks posed by such an arrangement, such as reduced liquidity, susceptibility to manipulation and the untested technology.
It is therefore likely that the review process by the SEC will be drawn out over months or even years, as the concept adds new layers of complexity beyond a typical securities filing or even the proposed Winklevoss Bitcoin Trust.