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Crippling Losses Affect tZERO Amid Strong Fundamentals

tZERO, the securities token exchange owned by e-commerce giant Overstock, has had a pretty impressive year. However, despite breaking new ground and seeing significant gains in revenues over the past year, the company appears to still be struggling with profitability.

Two Sides of the Coin

Earlier this week, Overstock released its earnings report for the year’s third quarter. In it, the firm confirmed that tZERO had seen a 97 percent increase in net revenues year-over-year. Despite such strong performances, however, the subsidiary still lost $12.4 million overall within the period. Over the first nine months, tZERO posted a $35.5 million loss, coming despite revenues of $34.1 million. In the same period last year, the securities token platform lost $38.7 million on $15.7 million in revenues.

The subsidiary’s fundamentals did seem to be on the upsurge. tZERO has grown significantly in the past few months, with monthly trading volume moving from sub-$1 million levels in May to $21.8 million in August.

While it’s not entirely to blame, tZERO could pin some of its misfortune in September – a month where security token trading crashed substantially. The Security Token Market Report for September showed significant drops across the market, as only about $9.15 million was traded in the market – compared to $22 million in August. 

tZERO‘s TZROP token, which has considerable equity in the alternative trading system, held up over half of the total trading volumes with $5.3 million – down from $11.8 million in August. The asset’s price also declined 2 percent for the month, moving from $7.26 to $7.10. 

Hope on the Horizon    

Despite the setbacks, tZERO will try cutting its losses and shore itself up in different other areas. As explained earlier, the firm had a pretty good 2020, being one of the few crypto companies to escape the coronavirus pandemic relatively unscathed. In April, tZERO completed a $5 million capital raise, with participation from Hong Kong-based equity firm GoldenSand Capital.

Months back, the firm got approval from the Financial Industry Regulatory Authority (FINRA) to launch a broker-dealer service. Per a company press release, the approval came for tZERO Markets, a broker-dealer service that will serve American retail customers. tZERO added that it would also look into offering issuers with placement agents and investment banking services in the future.   

Saum Noursaleh, tZERO’s chief executive, explained that the approval was a significant milestone that would allow the firm to continue its expansion.

“Through tZERO Markets, we will establish a direct relationship with our customers, while also offering a streamlined experience for onboarding and trading digital securities. We expect tZERO Markets to launch its services in a couple of months,” Noursaleh added.

tZERO plans to launch the new service in the coming months. Besides the FINRA, it already has approval from the Securities and Exchange Commission (SEC).

Along with the new service, tZERO also plans to launch internationally. The firm is looking into developing mobile apps and a web platform for tZERO Market.

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