Overstock’s subsidiary tZero has raised $114.6 in a pre-ICO token sale to 1,100 purchasers, of which $100 million is funded, the company said in a statement.
Overstock’s CEO and founder Patrick M. Byrne, who has been a backer of bitcoin and crypto in general since at least 2014, said:
“I thank our early, strategic investors for sharing our vision to issue a preferred equity security token. Raising $100 million is no small task, and our team has worked tirelessly to conduct this offering in accordance with exemptions under the US securities laws.
The opening of the Subsequent Sale Period is another step toward establishing a new paradigm in the capital markets through innovative technology.”
The company is now hoping to raise another $150 million, with the option of raising it to a total of $300 million, from accredited investors.
Thus making them compliant with Rule 501 of Regulation D under the Securities Act of 1933, exempting them from needing a SEC license, while also limiting their sale to only rich individuals.
The token sale will be facilitated by SaftLaunch, as well as StartEngine, a technology platform that permits tZero to independently connect with prospective investors. Joseph Cammarata, President of tZero, said:
“As we transition to the Subsequent Sale Period, we are one step closer to our financing goals, including the use of a portion of the proceeds of the offering toward leveraging our blockchain experience and expertise to develop a trading system capable of trading tokens that are determined to be securities under the U.S. securities laws.”
The TZRO token is ERC-20 compliant, the company says. Which means it will run on top of ethereum’s platform like the vast majority of tokens.
With the company aiming to create a tokens stock market of sorts by utilizing blockchain technology for the clearing and movement of tokens.
The Securities and Exchanges Commission, however, has apparently begun scrutinizing the token sale according to a recent filing by Overstock, where after revealing SEC is conducting an investigation, they say:
“While the SEC is trying to determine whether there have been any violations of the federal securities laws, the investigation does not mean that the SEC has concluded that anyone has violated the law. Also, the investigation does not mean that the SEC has a negative opinion of any person, entity, or security.”
That still sent their stock down almost 10% after rising some 30% recently following the crypto-boom, but as their token sale is limited to accredited investors under the supervision of presumably an army of lawyers, it might be more a case of SEC over-reach than any wrongdoing.
That’s for time to tell, however, as this new innovative method tries to carve out its own space and perhaps its own business model outside of the banks.