This month the security token sector saw some shake-ups as GSR Capital significantly downsized its investment into Overstock’s security token platform – tZERO. Originally, GSR Capital inked a deal for around $404 million. Then the firm reduced the amount again to just over $100 million. In the end, GSR invested only $5 million.
The First Deal
The original agreement, signed last summer, called for GSR to first invest up to $270 million in tZERO. Additionally, the firm was to invest an additional $104 million into Overstock shares. Lastly, GSR planned to spend $30 million on the tZERO ICO. In return, GSR would receive an 18% share in the tZERO platform and what equated to around a 10% share in Overstock.
GSR Capital – A Second Deal
In March, GSR altered the deal again. This go-around, GSR Capital planned to co-invest with Singapore-based Makara Capital. Both firms planned to invest up to $100 million in tZERO common stock. As part of this early March 2019 agreement, Makara Capital and GSR Capital would gain the right to host STOs on tZERO’s platform, plus an exclusive first look at future STOs slated for release on tZERO. Both firms would obtain full access to tZERO’s management, advisors, accountants, properties, financial records, previous agreements, and a host of other pertinent information.
The Final Investment
Despite all the hype, GSR ended up only investing $5 million in funding into the tZERO project. The investment came in the form of $1 million USD, $1 million Chinese Renminbi, and $3 million in various securities. Makara Capital has not stated whether they plan to continue with the $100 million previously discussed. Company executives stated that the firm is in the due diligence process.
In a recent interview, Overstock CEO, Patrick Byrne explained that tZERO released GSR from all previous contractual obligations. Elaborating further, tZERO CEO, Saum Noursalehi commented that the investment was still “decent”.
Despite the minor setback, tZERO is ready for business. Discussing the new investment platform Patrick Byrne, CEO of Overstock, took a moment to describe the excitement behind the project. He touched on the recent successful launch of the firm’s trading technology, and he explained how the company has multiple partnerships in the works.
Earlier in the month, Overstock sent a letter to shareholders asking for the right to tokenize A1 shares and move them to the tZERO platform. The new shares would now be known as “Blockchain Voting Series A Preferred Stock”. If successful, tZERO developers plan to eventually go full blockchain. Notably, an ERC-20 standard called OSTK.0 exists on the Ethereum blockchain and has for some time.
tZERO Steams Forward
Importantly, Overstock gave a demonstration of the tZERO platform this month at one of the company’s earnings calls. The demonstration showcased a mobile tZERO Dapp. This demonstration, combined with Overstock’s desire to convert its shares to tZERO, showcases just how far along the project has come. You can expect to see some serious moves from this team in the coming weeks as tZERO picks up steam.