Thursday, March 17, 2016

Overstock Moves Forward with Blockchain Public Offering

By Anne Sherry, J.D. plans to offer shareholders the option to buy preferred stock that trades and settles entirely on a distributed ledger based on Bitcoin blockchain technology. The blockchain preferred stock will trade exclusively through Overstock's platform and alternative trading system. Traditional stock will also be available in the offering.

Overstock announced its plans at the International Futures Industry Conference, but the offering has been months in the making. Following an extended dialogue with SEC staff and multiple amendments, the Form S-3 registration statement took effect December 9, 2015.

The offering will be limited to shareholders as of a record date to be determined. Up to 1 million shares of blockchain and traditional Series A preferred stock will be available.

The blockchain technology undergirding Bitcoin and other cryptocurrencies is based on two sets of keys: one public, one private and known only to the end user. In contrast, Overstock's Form S-3 contemplates multiple private keys to be held by Overstock, the ATS, and the broker-dealer for the offering, DriveWealth. The filing acknowledges the cybersecurity risk, but also touts the convenience of centralizing private keys. Digital securities holders will be able to manage their accounts with a simple login and password, and the entities may be able to transfer ownership of the securities on behalf of the security holder or block further transfers of the securities.