Shares of Overstock.com rose 11.6 percent on Tuesday (Oct. 17) as a result of the company’s investment in blockchain, CNBC reports. The stock has reached four-year highs due to investor interest in the technology.
Overstock CEO Patrick Byrne has spent three years developing a blockchain-focused effort called Medici Ventures. Much of the investor excitement surrounds Medici’s subsidiary, tZero, a solution applying blockchain to stock trading and the exchange of digital coins.
Company shares increased 23.5 percent on Sept. 27 when the company announced tZero was partnering with two financial services firms to develop a new method for trading digital coins, but have since declined from the four-year high.
“I think the new story for Overstock is that we should anticipate this kind of volatility that historically was limited to when the company reported earnings,” said Tom Forte, analyst at broker-dealer firm D.A. Davidson. “It is encouraging to see legacy financial services acknowledging the potential of the blockchain to disrupt and transform the financial services industry.”
Despite investor buzz, Medici Ventures is still generating losses for the company. Pre-tax, Overstock disclosed the subsidiary posted losses of $3.3 million during the second quarter, up $400,000 from the same period of last year.
Overstock isn’t the only company to embrace ventures involving blockchain. JPMorgan Chase and IBM have both announced they are working with financial institutions to use blockchain technology in global payments projects.
CNBC analysis found that corporate interest in blockchain technology has generally been trending upward in the last year, with occurrences of “blockchain” and related words increasing in the documents of American companies with market capitalization of $5 billion or more.
“It’s going to be a loss until it takes off,” said short-seller Marc Cohodes, undeterred by Medici’s current unprofitability. “You’re not paying anything for blockchain and you’re getting retail at a steep discount, [and] I think the stock’s going to go to $100.”
The price would be 230 percent above the stock’s closing price Monday (Oct. 16).