tZERO, a leader in financial innovation and liquidity for
private companies, released today the following letter to investors
from CEO Saum Noursalehi.
Dear Investors,
It has been an exciting few months for tZERO. We have a platform
that enables average investors to trade shares of private companies
as easily and efficiently as they trade shares of Apple. The value
of our ecosystem is becoming increasingly relevant as companies
remain private longer, while their investors have limited options
for secondary liquidity.
Today, there are half as many public companies as there were in
the late nineties (~8,000 vs ~4,000 today) and more of the value
creation has shifted to the private stage of a company’s lifecycle.
Furthermore, the multiples that companies today are achieving
post-IPO are often a fraction of what was achieved from Series A
through IPO. Unfortunately, average investors generally do not have
access to these private assets. Moreover, secondary transfers for
these securities, if they happen at all, largely occur through
slow, expensive, and opaque private transactions.
The opportunity for an organized and automated marketplace is
growing, yet no one has managed to fully capitalize on this
opportunity. tZERO ATS is already transacting hundreds of thousands
of shares per month and growing rapidly. While this volume may be a
fraction of what is transacted in the traditional world, it is a
major and positive trend in our growing ecosystem. This platform
allows retail investors the ability to invest in these exclusive
assets and offers issuers the opportunity to provide valuable
liquidity to their existing shareholders. We believe tZERO is the
solution to democratize access to private markets.
It is still the early days, but tZERO now accounts for
approximately 95% of security token trade volume and 80% of total
token dollar value. The OSTKO dividend created a significant
increase in our volume, and July will be our strongest month to
date.
With the heavy build phase of development behind us, and as part
of our preparation for an external capital raise, we have
significantly reduced our expenses. Our run-rate on cash burn is
down almost 45% year-over-year. In addition to reducing headcount
and legal costs, several leaders accepted cash salary reductions
and received additional equity compensation. I personally reduced
my salary by 60%. Our board members are also now only compensated
with equity. This underscores just how much I, and others, believe
in our mission.
Recent Accomplishments
I am pleased to report, we continue to execute against our
strategic roadmap. Below is a list of some of our recent wins.
- July 22: Signed agreement with Aspen Digital to trade
St. Regis Aspen token.
- June 30: Delivered record ATS volume and crypto user
growth in the second quarter.
- June 29: Added charts on the iOS app (coming soon to
Android).
- June 8: Named ‘Best Blockchain Solution of the Year’ by
FTF News.
- May 28: Announced two new broker-dealers are live and
trading.
- May 19: Successfully distributed Overstock’s digital
dividend (OSTKO).
- April 21: GoldenSand Capital completed its tZERO equity
investment.
- April 16: SpeedRoute had record monthly trading volume
for U.S. equity markets.
- April 14: Added support for Tezos to our digital
securities protocol.
Overall, we are encouraged by our momentum and believe that we
are well-positioned to execute both our short and long-term growth
strategies.
Product Roadmap
While we recently achieved several key milestones, our
overarching priorities remain. These include adding more assets,
increasing liquidity on the ATS, and improving the investor
experience. I have highlighted some of our key objectives across
these priorities, below.
- Assets
- Trade the St. Regis Aspen token.
- Integrate third-party issuance/transfer agent platforms.
- Trade new issuers (existing assets, new offerings) on the
ATS.
- Liquidity
- Launch tZERO Markets on our website (pending regulatory
approval).
- Develop a multi-clearing solution.
- Integrate more broker-dealers.
- Offer 24/7 order entry.
- Experience
- Streamline tZERO Markets onboarding (pending regulatory
approval).
- Provide the user experience to trade all digital assets.
I am confident that we can execute most, if not all, of these
initiatives by year-end.
Our foremost priority is to tokenize and trade high-quality
securities across a variety of industries, the biggest opportunity
being real estate and pre-IPO companies. Initially, we focused on
companies and assets that were looking to raise capital and later
trade on our platform. While we continue to believe this category
of issuers provides a significant opportunity, the time from
signing a deal to trading is lengthy, as we are reliant on the
successful conclusion of the capital raise before we can trade the
asset. Thus, we have shifted our focus to two categories. The first
is existing digital securities. There are over 200 companies and/or
assets that have been tokenized to-date. Many of these assets do
not meet the criteria for our platform, either in size, quality, or
both. There are some, however, that tZERO ATS may be interested in
trading, and the business development team has had positive
engagement with these issuers.
The second category of issuers we are focused on is private
companies, particularly those with a large number of investors, and
other illiquid assets, such as commercial real estate. This
represents the largest category of potential issuers as there are
not many liquidity solutions available to these types of assets
today. Our competitors in the pre-IPO liquidity space tend to
exclusively service unicorn-type companies. Furthermore, they do
not offer a live trading platform for their assets. For example,
purchasing equity in a company often requires a middleman to
facilitate the transaction and a minimum investment of $100,000,
which can take months to close. Effectively, it is like
buying/selling a home, which is an inefficient and costly process.
Our platform, on the other hand, allows investors to trade shares
of private companies in a streamlined experience. There are no
minimums and, in most cases, non-accredited investors may also
participate in investments. This is where we intend to focus the
bulk of our business development efforts. Also, given there is no
capital raise associated with this cohort, the variables that can
impact success and timing are significantly reduced, and often an
asset can be live and trading in a matter of weeks from
signing.
I am also pleased to note, we recently hired a key player to
help our efforts on the issuance front. Michael Gaviser, a seasoned
capital markets veteran, recently joined the tZERO team. He will
focus on strategy and business development. Michael spent time in
various senior capital markets roles, including Managing Director
at Navab Capital Partners, KKR, and AllianceBernstein. I am excited
to have Michael join the tZERO team and look forward to him helping
advance our company mission.
Lastly, we continue to work with FINRA and the SEC on the
approval of our retail broker-dealer, tZERO Markets. This month, we
conducted a product demonstration with FINRA, and we believe we are
at the tail-end of the process. We anticipate a decision this
quarter and are working on completing the development work to
launch on our website once we receive approval.
All in all, it has been a productive year thus far. I am
encouraged by our recent progress, and I believe we are approaching
an inflection point in the business. With the bulk of the
development phase behind us and regulatory approvals soon to be
behind us, we are focused on commercializing the business. We still
have a lot of work ahead, however, I am more confident than ever
that we are positioned to succeed, and I look forward to keeping
you abreast of our journey.
Respectfully,
Saum Noursalehi CEO, tZERO
Investor Notice
Investors should note that trading digital securities could
involve substantial risks, including no guarantee of returns, costs
associated with selling and purchasing, no assurance of liquidity
which could impact the price and ability to sell, and possible loss
of principal invested. Further, an investment in single digital
security could mean lack of diversification and, consequently,
higher risk.
No Offer, Solicitation, Investment Advice or
Recommendations
This release is for informational purposes only and does not
constitute an offer to sell, a solicitation to buy, or a
recommendation for any security, nor does it constitute an offer to
provide investment advisory or other services by the tZERO or any
of its affiliates, subsidiaries, officers, directors or employees.
No reference to any specific security constitutes a recommendation
to buy, sell, or hold that security or any other security. Nothing
in this release shall be considered a solicitation or offer to buy
or sell any security, future, option or other financial instrument
or to offer or provide any investment advice or service to any
person in any jurisdiction. Nothing contained in this release
constitutes investment advice or offers any opinion with respect to
the suitability of any security, and the views expressed in this
release should not be taken as advice to buy, sell or hold any
security. In preparing the information contained in this release,
we have not taken into account the investment needs, objectives,
and financial circumstances of any particular investor. This
information has no regard to the specific investment objectives,
financial situation, and particular needs of any specific recipient
of this information and investments discussed may not be suitable
for all investors. Any views expressed in this release by us were
prepared based upon the information available to us at the time
such views were written. Changed or additional information could
cause such views to change. All information is subject to possible
corrections. Information may quickly become unreliable for various
reasons, including changes in market conditions or economic
circumstances.
About tZERO
tZERO Group, Inc. (tZERO) is a majority-owned subsidiary of
Overstock.com, focusing on the development and commercialization of
financial technology (FinTech) based on cryptographically-secured,
decentralized ledgers – more commonly known as blockchain
technologies. Since its inception, tZERO has pioneered the effort
to bring greater efficiency and transparency to capital markets
through the integration of blockchain technology. For more
information on tZERO, please visit: https://www.tzero.com/.
tZERO is not a registered broker-dealer, funding portal,
underwriter, investment bank, investment adviser or investment
manager, and is not providing brokerage, investment banking or
underwriting services, recommendations or investment advice to any
person, and does not provide any brokerage services. tZERO takes no
part in the negotiation or execution of secondary market
transactions for the purchase or sale of securities and at no time
has possession of investor funds or securities in connection with
such transactions.
About tZERO ATS
tZERO ATS, LLC is a broker-dealer registered with the SEC and a
member of FINRA and SIPC. More information about tZERO ATS may be
found at www.finra.org. Digital securities that trade on tZERO ATS
are conventional uncertificated securities. Ownership of such
securities is reflected on the traditional books and records of
regulated market participants. The terms "digital" and “digital
security” refer to the blockchain technology elements of a security
that are intended to enhance investor experience through added
transparency but have no controlling or legal effect.
About SpeedRoute
SpeedRoute, LLC is a broker-dealer registered with the SEC and a
member of FINRA and SIPC. More information about SpeedRoute may be
found at www.finra.org.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200729005299/en/
Investors: Michael Mougias, +1-347-293-1248 mmougias@tzero.com
Media: Alexandra Sotiropoulos, +1-347-293-1416
asotiropoulos@tzero.com
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