Personal Finance

Why Overstock.com Shares Fell 12% Last Month

A highway marked Cryptocurrency rises into the sky, ending in a giant question mark. On the road, a man in a red shirt ponders the situation with his hands clasped behind his back.

What happened

Shares of Overstock.com (NASDAQ: OSTK) fell 12.1% in February 2018, according to data from S&P Global Market Intelligence . The online retailer's slide was closely tied to the cryptocurrency and blockchain markets.

So what

Leading cryptocurrencies, including bitcoin, dipped more than 20% lower in the first week of February amid an onslaught of bad news . Regulators in China and South Korea announced crackdowns on cryptocurrency trading platforms, while their Indian counterparts vowed to rid the country of cryptocurrency payment systems.

Overstock.com has a long history of exploring cryptocurrency payments and chairman Patrick Byrne recently said that he might want to sell off the e-commerce business and pour the resulting funds into a purely blockchain-based business model. Therefore, it's not unusual to see Overstock's share price follow the general trends of the cryptocurrency market, and that was the case in early February as well.

Bitcoin prices recovered later in the month, but Overstock failed to latch on to that surge. It's unclear exactly why the stock only stuck to the early downtrend and not the later mid-month rebound, though a couple of negative sound bites drove share prices down again near the end of the month while cryptocurrency prices continued to rise.

A highway marked Cryptocurrency rises into the sky, ending in a giant question mark. On the road, a man in a red shirt ponders the situation with his hands clasped behind his back.

Image source: Getty Images.

Now what

The pain continued in early March, as the Securities and Exchange Commission launched an investigation of Overstock's hot-off-the-presses tZERO trading platform and its associated cryptocurrency tokens. tZERO is certainly an innovative take on fraud-proof asset trading, but Overstock may or may not be the best company to run it.

Reacting to the SEC inquiry, share prices dropped as much as 10.2% on March 1. The stock has already bounced back from that plunge but remains at a 6% negative return so far in 2018 while the general market traded slightly higher. That's a sharp slowdown from the 52-week view, where Overstock has posted a market-stomping 244% gain -- far behind bitcoin's 600% gain but still mighty impressive.

Expect more detail on tZERO and the SEC probe when Overstock reports fourth-quarter results this Thursday afternoon.

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Anders Bylund has no position in any of the stocks mentioned. He does own some bitcoin tokens. The Motley Fool has no position in any of the stocks or cryptocurrencies mentioned here. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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