Investors and traders should give serious consideration to take advantage of the weakness in Overstock.com’s share price which has been caused by short sellers. Overstock’s shares will soon resume the upward momentum that they had after the company made an announcement on August 9, 2018. The announcement was about GSR Capital investing $270 million into tZERO, the company’s 80% owned regulated crypto infrastructure subsidiary at a $1.5 billion valuation. The company also announced that GSR Capital had agreed to:
- Purchase $30 million of tZERO security tokens held by Overstock.com.
- Invest $104 million into Overstock.com from purchasing 3.1 million shares at $33.72 per share.
On August 10, Overstock.com’s share price increased to as high as $46.85 on heavy volume. The increase was more than 20% when compared to the prior day close of $38.40.
After peaking on August 10th the shares have since sold off sharply and to close to their 52 week low. There were two things that have caused Overstock.com’s shares to decline:
- The biggest sell off of crypto currencies for 2018, began a few days after the company’s announcement. See “Overstock Loses 21 Percent of Market Value as Crypto Craze Fades”, August 14, 2018, Bloomberg.
- There is a significant short position that has been building in Overstock.com shares. The short interest for August 15, 2018 was 9.5 million shares, a 12-month high. This compared to a low of 2.1 million shares on September 15, 2017. What is obviously going on is that the short sellers are continuing to aggressively short Overstock.com shares to a price below the $33.72 share price that GSR is paying. The short sellers are hoping that GSR will back away from investing approximately $400 million into Overstock.com and its tZERO subsidiary due to the share price trading in the market at a lower price. Should that happen Overstock.com’s share price would collapse.
Based on the research that I have conducted on GSR Capital I am quite confident that they will invest $400 million into Overstock.com regardless of how low the share price in the open market goes. See my August 9, 2018, article entitled “Overstock.com shares and crypto security tokens of subsidiary tZERO should be aggressively purchased NOW!”.
If I am right, the short sellers are at great risk. Upon Overstock.com announcing that the GSR Capital transactions have been completed I predict that its share price will immediately rocket to above their August 10th high. I also predict that the share price will make a serious attempt to reach a new high for 2018 by year end.
There are two catalysts or announcements that could drive Overstock.com’s share price much higher. The first is an announcement of the GSR deals being closed. The second is an announcement that tZERO has become operational. I believe that either or both of these announcements will be made by the end of October.
There are three ways to capitalize when Overtock.com makes the announcement. The first is to purchase shares outright. The second is to purchase short term call options. The third is to sell put options.
The four-minute video below entitled “Crypto’s Wild West” is highly recommended. It explains the need for regulated crypto infrastructure which tZERO is uniquely positioned to fill.
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