Key Takeaways
- • GSR Capital, a Beijing-based private equity firm, signed a letter of intent to invest up to $270 million for an 18% equity stake in tZero, valuing the blockchain subsidiary at $1.5 billion if the deal closes December 15, 2018.
- • The investment structure comprises three components: $270 million for tZero equity, $104.55 million for approximately 10% of Overstock.com common stock (3.1 million shares), and $30 million as part of tZero's initial coin offering, bringing total deployment to approximately $404 million.
- • tZero's $270 million investment would represent the largest single investment in a blockchain startup to date, with the combined ICO raising $134 million total.
- • Overstock CEO and tZero executive chairman Patrick Byrne attributed the capital sourcing to Asia partly due to difficulty raising capital domestically in the United States, with three additional participating investors from Asia and the Middle East expected to be announced.
- • tZero, headquartered in Salt Lake City, holds Securities and Exchange Commission licensing for its blockchain-based securities trading platform.
Summary
GSR Capital, a Chinese private equity firm with offices in Beijing, Hong Kong, and the United States, has committed to one of the blockchain sector's largest capital deployments through a multi-layered investment structure targeting Overstock.com and its blockchain subsidiary tZero. The primary $270 million investment grants GSR Capital an 18% equity stake in tZero at a $1.5 billion post-money valuation, contingent on closing by December 15, 2018. According to Overstock management, this single investment would exceed all previous blockchain startup funding rounds on record.
The transaction architecture extends beyond the core tZero equity investment. GSR Capital simultaneously committed $104.55 million to acquire approximately 3.1 million shares of Overstock.com, representing roughly 10% ownership of the publicly traded parent company. Additionally, GSR Capital allocated $30 million to participate in tZero's initial coin offering, which is raising $134 million in total capital. Combined, the three investment vehicles represent approximately $404 million in total capital deployment by the Chinese firm.
Patrick Byrne, CEO of Overstock.com and executive chairman of tZero, characterized the deal structure as a "wedding cake" arrangement and noted that independent letters of intent were executed between GSR Capital and both tZero and Overstock separately. Byrne indicated that three additional investors from Asian and Middle Eastern markets are expected to be announced as co-participants in the funding round.
tZero, domiciled in Salt Lake City, Utah, operates as a regulated platform for trading securities issued on blockchain infrastructure and maintains licensing from the U.S. Securities and Exchange Commission. Byrne attributed the geographic origin of the capital to relative difficulty sourcing comparable investment sizes from domestic U.S. sources, positioning the GSR Capital commitment as a validation of international appetite for blockchain infrastructure and tokenized securities platforms.
The transaction architecture extends beyond the core tZero equity investment. GSR Capital simultaneously committed $104.55 million to acquire approximately 3.1 million shares of Overstock.com, representing roughly 10% ownership of the publicly traded parent company. Additionally, GSR Capital allocated $30 million to participate in tZero's initial coin offering, which is raising $134 million in total capital. Combined, the three investment vehicles represent approximately $404 million in total capital deployment by the Chinese firm.
Patrick Byrne, CEO of Overstock.com and executive chairman of tZero, characterized the deal structure as a "wedding cake" arrangement and noted that independent letters of intent were executed between GSR Capital and both tZero and Overstock separately. Byrne indicated that three additional investors from Asian and Middle Eastern markets are expected to be announced as co-participants in the funding round.
tZero, domiciled in Salt Lake City, Utah, operates as a regulated platform for trading securities issued on blockchain infrastructure and maintains licensing from the U.S. Securities and Exchange Commission. Byrne attributed the geographic origin of the capital to relative difficulty sourcing comparable investment sizes from domestic U.S. sources, positioning the GSR Capital commitment as a validation of international appetite for blockchain infrastructure and tokenized securities platforms.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.