Overstock.com, the online retailer currently developing decentralized stock market Medici, has outlined how it might issue digital securities in a new Securities and Exchange Commission (SEC) filing.
Submitted on 24th April, the S-3 form outlines Overstock’s intention to issue new stocks or securities. The offerings, according to the company, could amount to as much as $500m.
The filing also details how Overstock may seek to issue digital securities through an alternative trading system. Under a section entitled 'Risks Applicable to Digital Securities Offerings', the company states:
The prospectus goes on to identify how the digital securities would differ from traditional securities, highlighting that settlement periods would be much shorter. In terms of risk, the company also acknowledges the "novel and untested" nature of the concept.
Overstock director of communications Judd Bagley suggested the filing fits into the company's broader plans to use the technology underlying bitcoin to power a new kind of stock exchange.
"There are many parts involved in achieving this, and one of them is the Alternative Trading System we’ll be using to match buyers and sellers. In other words, an ATS is part of the Medici project," he said.
According to the prospectus, faster settlement times are one benefit of utilizing digitally-based securities. Overstock also pointed to the various risks associated with the concept, some of which parallel the challenges of holding digital currencies.
Notably, the prospectus outlines how, if implemented, the trading system would disclose certain types of investment information, explaining:
The document also references the potential use of multi-signature technology, noting how "any number of [private keys] may be required in order to authorize a transfer of ownership of the digital securities."
Limited liquidity was identified as a key risk factor within a crypto-powered trading environment that could pose a risk to investors.
"You may not be able to resell your digital securities on a timely basis or at all," the filing notes.
Medici work underway
Bagley noted that an alpha version of the exchange is currently being tested internally. Looking ahead, he said that Overstock will continue refining and polishing the concept:
"The technology works," he added. "It’s very exciting."
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