Overstock.com recently filed a registration statement with the SEC to register its securities for sale to the public. The novel part is the fact that the securities offered will be represented by digital stock certificates. According to the filing these are …”uncertificated securities, the ownership and transfer of which are recorded on a cryptographically-secured distributed ledger system using technology similar to (or the same as) the distributed ledger technology used for trading digital currencies.” This sounds a lot like the blockchain used by Bitcoin.


Overstock was one of the first retailers to accept Bitcoin. In addition, Overstock’s CEO is a supporter of Bitcoin and is less than a fan of Wall Street. Overstock filed a $3.5 Billion lawsuit against 10 Wall Street firms in 2007 for participating in a scheme to distort the market price of its stock (aka market manipulation).

What is novel?

Some of the interesting aspects of this offering are:

1. There will be no physical stock certificates (unlike all those held by brokers for their clients in street name)
2. The securities will not trade on a stock market
3. The trading system that will be used is untested
4. Settlement of trades will happen almost immediately
5. These securities may trade at different prices that their equivalent on Nasdaq
6. The digital securities trading ledger is public so that anyone can see who bought and sold these securities
7. There is no certainty as to how payment for the securities will be effectuated

Deep thoughts

Most investors in public securities never see their stock certificates so a plan to do away with this is in line where technology is moving in general. Unless you have a room wall papered with stock certificates you will not be missing anything. The untested nature of the trading system is a concern but one that I am certain can be solved by new and better technology. The limited nature of the trading is an issue as a larger number of participants has a self-policing effect. However, the counterbalance to limited trading is the public nature of the trading ledger which should reduce abuse. Amen to the almost simultaneous settlement. In the era of increasing computing power it is unfathomable that a trade would take 3 days to clear. Finally, in the near term the challenges and newness of the trading system may cause the market price to be lower for these securities.

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