I wrote about this idea 3 months ago in my piece On the Transformation of Overstock.com. Since it's been a while and now that we have SteemLeo encouraging us to put all our financial musings into one place, I thought it would be a great time for an update.
Price is what you pay. Value is what you get.
I've been thinking about this quote a lot in the past few weeks for some reason. The older I get, the more I seem to be able to confidently focus in on my 3 or 4 best investment ideas. And people can call me crazy all they want, but I really think OSTK is one of my best ones in a while.
Admittedly, I was a little early a few months ago, but that's ok with me. Crypto has taught me to be a patient HODLer and I've dollar cost averaged (DCA) all the way down from the very first day bitcoin spiked 25% to its recent all-time low of about $9 per stub.
As usual, that DCA has paid off handsomely. Let's take a look at today's holiday pricing:
If I had been a little bit more disciplined about my entry and not FOMO-ed in when crypto started going crazy, I'd probably be pretty heavily in the green right now. As it is, I'm about even to slightly up. And that's okay for me. I have 2 of the items that I firmly believe you are gonna need every single time you put your money on the line:
- A long-term investment time horizon and
- A sound investment thesis.
If you want to be successful with your investing, these are absolute must-haves.
In my last piece, I stated,
The plan going forward for OSTK seems to be quite Berkshire-y, to be honest. If Byrne can't sell the the e-commerce platform for cash, then he can clearly use it as a cash-flow generator and deploy excess profits into the long-term value-generating machine that is Medici.
In that regard, there was a very significant update from CEO Patrick Byrne about two weeks ago. As noted in this Benzinga article,
"Two very attractive acquirers that I would have put high up on my list have shown up," Byrne told CNN Thursday at the Fortune Brainstorm Finance conference in New York.
Given that the online e-commerce business is doing about $1.2 billion in sales per year, and has recently stopped trying to cut prices so aggressively in a bid to compete with Wayfair, I gotta believe that whatever they get from this potential sale of the original business is going to be significantly more than the current market cap on the stock, which is currently around $520 million.
What's a reasonable price to pay for the legacy Overstock.com business?
Well, let's see, Wayfair itself trades at a price/sales (P/S) ratio of 1.79. Let's be generous and give OSTK a much more modest multiple of 1.2. At such a valuation, a sale would net OSTK $1.44 billion in cash, which is nearly 3 times the price that the stock is currently trading at.
Yes, that basically means that a purchase of the stock at these levels means you get an extremely undervalued e-commerce platform AND a portfolio of blockchain assets that could eventually produce multiple unicorns.
The most likely candidates for potential unicorns in that Medici Ventures portfolio are still the same as I outlined three months ago. The only difference now is that they've done another 3 months of development!
Tzero has recently released its own crypto wallet and mobile exchange app. An analyst at DA Davidson has already called the releases "a significant milestone".
Another milestone for t0 is the release of its second digital security, OSTKO, to trade on its alternative trading system (ATS) platform known as Dinosaur. OSTKO is a Digital Voting Series A-1 Preferred Stock with the same access to the equity represented by Nasdaq-listed OSTK. OSTKO joins Tzero's own security token as the only two digital assets currently available on Dinosaur. As more digital securities move to trade here, the likelihood of getting closer to a unicorn valuation comes closer and closer.
Medici Land Governance (MLG) is the other likely winner in the Medici stable. That team literally represents the word BUIDL. In the past few months, they have onboarded the entire property records of Teton County, Wyoming. It took less than 6 months to go from signing the deal to realizing the first iteration of the system they were contracted for. That is amazing work! Teton County is the home to the world renowned and utterly bucolic Jackson Hole:
Recently, the entire country of Liberia signed up to receive similar services. In these types of World Bank deals, the initial pilot project is often done pro bono, but it's a great opportunity to lock one's self in as the preferred contractor for later much bigger and more lucrative projects down the road.
In addition to MLG's existing work in Mexico, Zambia, Rwanda, and other places, these recent deals offer the very tantalizing prospects of setting up long-term recurring revenue streams. I mean, just go to your local county courthouse. It's likely that they've been using their existing systems for 30-40 years. If MLG can win over a county like Jackson Hole's, that's an interesting chance to earn fees for a good long time by providing their "blockchain tech stack for civilization."
So where do we get off the OSTK train?
The past is prologue, in my humble opinion which is no way intended to be construed as any type of financial advice. Remember that it might be very soon, whenever they eventually sell off their .com business, that OSTK becomes the only highly liquid "blockchain pure play" on the stock market. Let's take a look at the last time bitcoin went on a bull run:
OSTK went as high as $89.80 on the day of the peak of crypto mania back on January 8, 2018.
I'll aim to start taking profits at $45 and be fully out by $60 per stub.
Papa's gotta pay dem student loans, after all!