Overstock.com shares plummeted on Tuesday, with the stock dropping to its lowest level in more than seven years as it extended its longest streak of losses in more than a decade.
The slump came after the e-commerce company reported third-quarter results that missed expectations, and which featured a 21% drop in revenue from the prior year. It also filed for a possible offering of stock of up to $150 million of shares offered from time to time through a sales agent, JonesTrading, under a Capital on Demand sales agreement. The size of the potential offering is large relative to the size of the company overall; Overstock currently has a market capitalization of about $278 million.
The size of the offering “suggests the potential for a significant amount of dilution,” said Tom Forte, an analyst at D.A. Davidson, who added that the move was a “logical” one for Overstock to take.
“I don’t know if I should use the term ‘safety blanket,’ but this could be the bridge to a point in time where retail business generates enough cash flow to fund Overstock’s blockchain investments.”
Davidson is currently the only firm tracked by Bloomberg that covers the stock. Forte has a buy rating on the shares, which he reiterated in a phone interview, saying he viewed both the retail business and the blockchain business as undervalued.
The stock dropped as much as 19% and was trading at its lowest level since July 2012. Shares were on track for their ninth straight daily decline, the longest losing streak since a 10-day drop that ended in October 2008. Overstock shares have lost about 24% of their value over the nine-day decline, and are down 70% from a September peak. Much of that selling was related to a cut forecast and the resignation of its chief financial officer.
In a conference call that followed the results, Overstock also detailed its plans with respect to a digital dividend.
“The clarity that was provided was mainly on the timing and calendar,” Forte said. “I don’t feel like we learned anything new, but the call reaffirmed that it is moving forward with the digital dividend, which is encouraging.”