Section 16 Filings
Updated as of February, 22 2018 4:00 p.m. ET
Minimum 20 Minute Delay
OVERSTOCK.COM, INC filed this Form 8-K on 11/14/2017
Street from me when I was 13 and used to drive me to school, and we were friends. And I took, like, 4, 5 bad reports about me, but when the reports came out, when I started Overstock, out of respect for this old man, I invited him on the board. When people started slagging him is when I got in that fight with Rocker, and then that all turned into this big thing. The point of all this, for you who are trying to understand the value of our company today, is in the process of all those fights, we got a piece of paper, we learned something. I'm going to show you a piece of paper that cost you, the shareholders, $20 million to see. That's how much it cost for us to get this piece of paper. This comes, sometimes it's slow, I'm told. Okay. I can legally show this. This came out of that lawsuit. This is from Goldman Sachs. How much of Goldman Sachs prime brokerage actually comes from this thing called securities lending? The answer turns out to be 75% of American prime brokerage revenue. I thought it was 5% or 10%, but it turns out it's 75%, which is why when I started getting in a fight with David Rocker about this thing called naked short selling, the whole world fell on me, it's because it turns out I was talking about 75% of the revenue of Goldman Sachs; so this is why it's so profitable. Let me point out, this is the revenue, not the profits. Because the profits of the securities lending desk are relatively, I mean, the expenses are relatively tiny. So, I suspect it may be 100% of the profits of Goldman Sachs. This is what's going on. This is securities lending, how it's supposed to work. A pension fund has some stock that custodian with a prime broker, the prime broker finds a short seller who will pay $20 for a locate, give him the locate, takes the $20, that's how it's supposed to work. But, how it really works is things like this: There's very little to keep the prime broker when he sees that there's a short seller willing to pay $20 for that locate. Nothing to keep them from telling other prime brokers, I mean other short sellers, Oh, I'll give you a locate, too, I'll give you a locate, too. We have all kinds of data, we have all kinds of data that, even when the government, the SEC where they went in and tried to do audits on this stuff, in like, 2007, 2008, they were telling Goldman, we do these audits. Well, they were telling the industry we do these audits on your locate trails, you're supposed to record whose stock you're lending, your guys are running things like Mickey Mouse and Daffy Duck and stuff. That's why they overlent much more stock than they had, which is why a couple other things happened. One, is one of the reasons, and this has been sort of forgotten from history, if this slide comes up, that when Alan Greenspan, when the world was collapsing in October 2008 and Greenspan came out of retirement and talked to Congress, he identified it as partially as a settlement crisis. That settlement crisis came about because of that over-locating and the sloppiness, just the slop in that whole locate system. In addition, it has led to, I believe, the pension crisis. There's a recent actuarial report that what the pensions have been doing is, assuming a 7.5% return on actuarial assumption, and they've been earning 4.5% for years; and that difference of 3% is what's bankrupting them. Well, a group of pension funds have just sued the prime brokerage industry over collusion in the securities lending market and what they're suing is to recover that 3% out of which they have been deprived. Well, I think this could become the first $1 trillion lawsuit in American history, it's a class action suit, I think you'll see, and by the way, I had nothing to do with the suit. As soon as it was filed, I found out that people were trying to, private detectives were figuring out if I was behind this; I'll save you guys the money, I had nothing to do with this suit. However, I do now believe that there'll be other pension funds joining us. So, at the heart of all this is that issue I was talking about. It all goes to the securities lending desk, but which is also responsible for 75% of the revenue. So, tZERO has the answer to this and in tZERO system, the role of those 6 prime brokers is significantly reduced. We have this system where we have a SEC-compliant venue that can trade blockchain. We're taking the stock, running an overnight auction, generating a locate but it's not even a locate, tt's a better than a locate, it's a pre-borrow. We call it a DLR, digital locate receipt. We believe that because we're taking an opaque over-the-counter market onto an exchange, you'll see price discovery work much better. So, let's say the short sellers are going to pay $10 instead of $20, that $10 goes in and $8 goes to the pension fund, and we keep $2. Doing God's work, what we're basically doing is we have found a pipe. We found, through this crazy lawsuit that you shareholders indulged all these years, we found the pipe that was really the pipe of 75% of the revenue of Goldman Sachs' prime brokerage in the United States. What we have invented is a thing that can basically replumb this piping and have it go back to the pension funds, thereby, lessening the pension fund crisis, and we make a couple of shekels in the process. This, since I spoke with you last, this is really moving, and I mean, in the last 5 days, because, finally you can basically say, "The wheels are off the ground in the last 5 days." On the supply side, starting 5 days ago, and now as of today, on a fixed basis, we have $80 billion to $120 billion of lendable securities. We do the math, and the math on what we think we can make off lending these securities while providing fair service to both sides, as opposed to the current system, is, I hate to tell you how much, but we'll see, time will tell. But somebody just offered us another $6 billion in hard-to-borrow, specifically hard-to-borrows and so on and so forth. We have 2,000 traders as of last Wednesday. Actually, the integration was only signed off yesterday, that you have 2,000 traders, active traders on systems that can use it, another 3,000 come on within another week. But really, what's more important is that we have, I mean, who knows how much they're willing to actually how much demand they can absorb. We are in the process of rollout with 12 brokers, some of these brokers may have 1,000 clients, say 3 admins, so what these brokers are doing today, and I mean, today, literally, November 8. They're saying, "Okay. You got 1,000 people, I'll let 50 of you use this, let's see how it goes. Next week or 2 weeks, if it works, we'll go to 200 people." So, we have these kinds of rollouts. Today is going to be a big magic day for this platform. It's the first time we're really considering it, I mean it's not loaded up with $800 million or $3 billion. It's got well, each day for the last 5 days, $80 billion to $120 billion of securities to lend, including lots of hard-to-borrow, thousands of stickers, lots of hard-to-borrow, billions of hard-to-borrows in there. So, for further information, just visit these addresses. I have to take a moment, I just have to take a moment, there's a certain irony here of anyone who has followed this story, of me, of all people, coming back with this. But, we basically have found well, as I say, the pipe, I mean, I almost can't say this without laughing, the pipe that is 75% of Goldman Sachs prime brokerage revenue, we have a better solution. It's based in the blockchain, no SEC audits and finding Daffy Duck and Mickey Mouse. Everything is 1:1, rigid, blockchain, immutable, secure, transparent to regulators. It's such a brilliant, I mean, such an invention. The idea that we have this, basically, in short, I'm telling you we have an invention; we're going after 75% of Goldman's revenue. We're going after, directly after, and the market has learned all about this, they really have. We are hearing from so many clients of prime brokers; I love this. I was just in New York, you can't believe the people who are reaching out to me. I'm thinking of these prime brokers, I'm reminded of who was it? Oscar Wilde said of George Bernard Shaw that Shaw doesn't have any enemies, but he's intensely disliked by his friends. Well, these prime brokers, may not have any enemies because everyone's afraid of them and we already know that they're trying to do something about this. We're already hearing that they're threatening people about who are trying to use the system. They don't have any enemies, but they're intensely disliked by their clients and now that we have $100 billion on the supply side, who knows if this gets off the ground or if the whole industry collapses into our lap like a thunder clap. I don't know, but you now know everything I know, you really do. That's information current as of a few hours ago, the last update, so this is really just in the last 5 days, really sort of on the track.
Okay. Next, the other thing that they have at tZERO that's so powerful, that is getting a lot of attention this quarter is a venue for trading ICOs, and it comes about from this. Around the last time I spoke to you, the SEC came out with a ruling regarding the Dow and it basically moved the line and the understanding of what's a security and what isn't, although one could also say a lot of people had been issuing ICOs, kind of dancing around the edges of things. Anyway, they clarified in this July 25 decision and because of that report, anything that is a security, any token that is a security has to trade on an SEC-compliant register or exchange that can trade this stuff. Well, like I say, when it comes to having an SEC-compliant ATS, year to trade blockchain, there's precisely one of those in the world as far as I know, and we own it. I'm not gloating, it's the humor of this, of after all these years, it just seems too funny to me, too funny to believe but here we are. So, the solution is an approved ATS, trade blockchain instruments, as I say, SEC-compliant. Just because it gets a little confusing for newcomers to this field, to explain, to understand what's going on. Think of the taxonomy as in our world, people who are working a blockchain or thinking of things this way. There's fiat currency, stuff that some government makes up by fiat, like a dollar. There's cryptocurrencies such as Bitcoin and Ethereum, then there are these tokens, these ICOs that have been getting issued like mad this year, and there are utility tokens and security tokens. Everything I was just talking about are security tokens. They have to trade on an SEC-compliant venue that handles blockchain. But, there's a whole universe of these other utility tokens that have been issued that are not going to be considered securities. I think that, going forward, the blend is going to go from probably 90-10 to 10-90, It's probably been 90-10 utility versus security or maybe even more extreme, and it's going to go the other way now in the other direction. Those utility tokens, those that both that have been issued and that are still issued, still could use an exchange to trade on. And we can use our ATS to do that. I mean, technically, technologically, it can do it, here's the problem, and this is an example of how you'll notice there is some things sliding here and there, dates and stuff. This is a very active, this
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