Overstock’s tZERO Fails to Meet Closing Date of GSR and Makara Capital $100 Million Investment

In a letter to shareholders dated April 18th 2019, tZERO Chairman Patrick Byrne informed investors that the $100 million investment involving both Makara Capital and GSR Capital had missed its mid-April deadline. Per the letter, tZERO is “not under any exclusivity with Makara or GSR and has retained advisors to pursue parallel alternatives”.

tZERO and Makara Capital’s Missed Investment Explained

The letter from Byrne— who also serves as Overstock’s CEO— said the $100 million raise was agreed upon in February and expected to close by mid-April.

‘Due diligence’ on the end of Makara was cited as a reason for the lack of a completed deal, wrote Byrne.

“Makara’s due diligence has progressed, and in the course of its due diligence Makara has proven to be a professional and serious fund. Still, the parties will not have a definitive deal in place by the mid-April target. tZERO plans to continue facilitating Makara’s diligence, but is not under any exclusivity with Makara or GSR and has retained advisors to pursue parallel alternatives.”

Notably however, Byrne said part of the original deal, where GSR purchases $30 million worth of tZERO security tokens, is still set to meet its May 6th deadline.

“I remind shareholders of the $30 million binding tZERO security token purchase agreement between Overstock and GSR, explained in detail in our Q2 2018 10-Q filing. Under that agreement, GSR has a binding $30 million funding obligation for May 6.”

Overstock’s annual shareholder meeting will take place just three days later, where Byrne “looks forward” to providing an update on the completed token purchase.

The Timeline of Makara and GSR Capital’s Investment in tZERO Explained

In August 2018, tZERO first announced GSR’s plans of a $270 million tZERO equity investment, $30 million worth of tZERO security tokens from Overstock.com, and over $100 million worth of Overstock.com shares.

Originally scheduled to close in December, the deal got an extension until the end of February, at the request of GSR.

In early-March however, Byrne announced that the deal had yet to be completed.

In a letter, Byrne wrote how GSR brought in Makara Capital to “co-lead an investment of up to $100 million in tZERO common stock”.

While that deal was expected to close this month, it looks as if tZERO will be turning to other investors.

Other recent tZERO updates include the launch of its trading platform in January, plans to launch a Bitcoin trading app, and the onboarding of Elliot Grossman as CEO of its upcoming broker-dealer affiliate.

The tZERO trading platform plans to facilitate the compliant trading of security tokens.

Currently, the only other SEC-regulated security token trading platform in the United States is OpenFinance Network.

What do you think of the missed investment involving tZERO, GSR, and Makara Capital? How will tZERO turn the remainder of 2019 around? We’d like to know what you think in the comments section below.

Image courtesy of tZERO.