Great write-up on a complex situation. I don't think the upside for $OSTK is juicy. Wayfair trades at 0.9x EV/S. If we assume same multiple for $OSTK (no reason it should be valued higher, IMO, due to lack of consistency in execution), that's 900mn of TEV. Add 500mn of net cash gives you TEV of 1.4Bn v. 1Bn market cap today. I think valuing the blockchain biz at 200mn is ludicrous. Binance is about to implode and SFB is already in jail - the crypto sphere is melting and nobody trusts it. I would ascribe zero value to Medici/T-Zero and all that jazz - name me one tradable security on T-Zero - how many assets has it "tokenized"? Nothing. So if you exclude the blockchain valuation (assume 100% writedown), that's at most 40% upside from today's valuation going into a VERY uncertain 3Q23 where losses may accelerate (as you say, GM is heading down sequentially and SG&A is heading up). I would say overall OSTK looks like a dumpster fire and there's nothing to get excited about. Oh yeah, if US consumer heads into a recession, I don't see people rushing to buy expensive furniture.
one point I would make is that ICE owns ~20% of tZERO, so that does provide some validation. Now, maybe ICE just sees that as a cheap hedge in the very unlikely scenario tokenization accelerates, but they sent an executive to run tZERO so I don't think you can toss that out the window entirely.
Some of the other stuff, GrainChain and this and that...I'm pretty skeptical. And to me tZERO looks a lot like these startups that plan to revolutionize healthcare: there are just so many entrenched interests in each industry, so much friction in making big changes, and not enough incentive to make changes, that they're likely to fail.
All that said, again we're at 14x TTM EBITDA trusting Overstock's valuation of those assets, and to me at $22 that's kind of the bigger issue. Get down to where that multiple is single digits, and I have some faith that the next quarter isn't going to be disaster, and maybe we can talk.
That's actually a bit closer to what I thought the story would be when we started this...hadn't looked at OSTK since pre-pandemic and in those days when it tanked the story was a little easier fundamentally at the lows, even if it was pretty much impossible (for me, anyway) to own the stock when Byrne was at the top.
So do we have a verdict on the current CEO/management. Do they get some credit for BBBY?
Great write-up on a complex situation. I don't think the upside for $OSTK is juicy. Wayfair trades at 0.9x EV/S. If we assume same multiple for $OSTK (no reason it should be valued higher, IMO, due to lack of consistency in execution), that's 900mn of TEV. Add 500mn of net cash gives you TEV of 1.4Bn v. 1Bn market cap today. I think valuing the blockchain biz at 200mn is ludicrous. Binance is about to implode and SFB is already in jail - the crypto sphere is melting and nobody trusts it. I would ascribe zero value to Medici/T-Zero and all that jazz - name me one tradable security on T-Zero - how many assets has it "tokenized"? Nothing. So if you exclude the blockchain valuation (assume 100% writedown), that's at most 40% upside from today's valuation going into a VERY uncertain 3Q23 where losses may accelerate (as you say, GM is heading down sequentially and SG&A is heading up). I would say overall OSTK looks like a dumpster fire and there's nothing to get excited about. Oh yeah, if US consumer heads into a recession, I don't see people rushing to buy expensive furniture.
yeah, that's a good summary.
one point I would make is that ICE owns ~20% of tZERO, so that does provide some validation. Now, maybe ICE just sees that as a cheap hedge in the very unlikely scenario tokenization accelerates, but they sent an executive to run tZERO so I don't think you can toss that out the window entirely.
Some of the other stuff, GrainChain and this and that...I'm pretty skeptical. And to me tZERO looks a lot like these startups that plan to revolutionize healthcare: there are just so many entrenched interests in each industry, so much friction in making big changes, and not enough incentive to make changes, that they're likely to fail.
All that said, again we're at 14x TTM EBITDA trusting Overstock's valuation of those assets, and to me at $22 that's kind of the bigger issue. Get down to where that multiple is single digits, and I have some faith that the next quarter isn't going to be disaster, and maybe we can talk.
That's actually a bit closer to what I thought the story would be when we started this...hadn't looked at OSTK since pre-pandemic and in those days when it tanked the story was a little easier fundamentally at the lows, even if it was pretty much impossible (for me, anyway) to own the stock when Byrne was at the top.