Despite strong security token growth, tZERO continues to lose money

Despite explosive third-quarter growth in the security token sector, Overstock’s Q3 2020 earnings report reveals that its tZERO alternative trading system (ATS) has continued to lose money.

The ATS specializes in security tokens, consistently hosting more than 95% of the sector’s monthly trade volumes. tZERO saw dramatic growth in recent months, with monthly volume growing from less than $1 million in May to push $21.8 worth of trade in August — before sliding back to $9 million in September.

Although tZERO’s net revenue increased 97% year-over-year to $11.1 million, Overstock's latest earnings report shows tZERO lost $12.4 million before taxes for the third quarter overall.

Looking at its performance over nine months ending on Sep. 30, tZERO posted a loss of $35.5 million despite net revenue of $34.1 million. Over the same period in 2019, tZERO netted $15.7 in revenue but lost $38.7 million.

In 2013, Overstock, then a successful online retail firm, became one of the first major mainstream businesses to support Bitcoin. Despite announcing it would shift away from retail to focus on blockchain and cryptocurrency technology in 2018, retail is the only segment of Overstock’s business that is currently profitable — driving $43 million in revenue last quarter.

Overstock conducted a $134 million initial coin offering (ICO) for tZERO in mid-2018.

Overstock venture arm Medici Ventures Inc, which provides ongoing support to the development of tokenization protocol Ravencoin (RVN), netted only $2.8 million in Q3 to post a quarterly loss of nearly $6.6 million overall.

On Oct. 28, Medici Ventures announced it had made an $8 million equity purchase in the Caribbean-focussed blockchain technology provider Bitt. Medici previously purchased $4 million of Bitt equity in 2016, followed by a $3 million equity purchase in 2018.