- Company Name
- Overstock.com, Inc.
- Stock Symbol
- Class Period
- August 3, 2017 to March 26, 2018
- Motion Deadline
- May 28, 2018
The complaint charges Overstock and certain of its officers with violations of the Securities Exchange Act of 1934. Overstock is an online retailer and purported advancer of blockchain technology. Through its online retail business, the Company offers a broad range of price-competitive products, including furniture, home decor, bedding and bath, housewares, and jewelry and watches, among other products. The Company sells its products and services through its Internet websites. In late 2014, Overstock began working on initiatives to develop and advance blockchain technology at its Medici Ventures business. Overstock emphasized its ties to cryptocurrency assets and the blockchain technology associated with them. On October 25, 2017, the Company confirmed that Overstock’s subsidiary, tZero, planned to raise up to “$500 million” for an “initial coin offering,” which consisted of selling new digital coins for projects based on the blockchain technology of the digital currencies Bitcoin and Ethereum.
The complaint alleges that during the Class Period, defendants issued false and misleading statements and/or failed to disclose adverse information regarding Overstock’s business and prospects, including that Overstock’s initial coin offering was highly problematic and potentially illegal and that the Company’s Medici business was hemorrhaging money. As a result of defendants’ false statements and/or failure to disclose this adverse information, the price of Overstock common stock was artificially inflated during the Class Period to as high as $88 per share.
On March 1, 2018, Overstock announced that the SEC had requested information about its initial coin offering, causing the price of its stock to fall more than 4%. On March 15, 2018, the Company stated that “the investigation could result in a delay of the tZero security token offering, negative publicity for tZero or us, and may have a material adverse effect on us or on the current and future business ventures of tZero.” Overstock also disclosed that the SEC was conducting an examination of advisers at tZero and that Medici had lost $22 million for 2017, despite the fact that Bitcoin prices had increased by 1,375% during that time. On this news, the Company’s stock fell more than 5%, from $48.20 per share to $45.70 per share.
Then, on March 26, 2018, Overstock announced that it planned an underwritten secondary public offering of 4 million shares of Overstock common stock. The prospectus for the secondary offering stated that the Company had already invested $107 million since 2014 in Medici, and that the proceeds of the secondary offering would further increase that investment. Among the Medici investments disclosed in the prospectus was the Company’s 50% stake in DeSoto Inc., which the Company admitted “does not expect to generate revenues or profits in the foreseeable future” and “does not currently have a specific plan to generate revenues or profits.” On the announcement of the secondary offering, the Company’s stock fell an additional 15%. Subsequently, on April 2, 2018, the Company pulled its secondary stock offering citing market conditions.