Overstock will airdrop security tokens to OSTK shareholders on May 19, potentially flooding its fledgling tZERO exchange.
Overstock has slated May 19 as the date to airdrop OSTKO security tokens as a dividend to its shareholders. They’ll get one security token for every ten OSTK shares they own as of April 27, making for 4.37 million tokens to be distributed in total.
Importantly, trading for these tokens will take place exclusively on Overstock’s alternative trading system tZERO. It processes less than $10,000 in daily volume on average.
Documents filed with the United States Securities and Exchange Commission (SEC) on April 7 announced May 19 as the scheduled date for Overstock’s security token airdrop to OSTK shareholders. Overstock registered its “dividend shares” with the SEC to ensure that the tokens are freely transferable by entities not affiliated with the company after distribution.
The announcement follows amendment’s Overstock’s dividend distribution plan, which was approved by the company’s shareholders on Feb.13.
Overstock executives expect OSTKO airdrop will benefit tZERO
In a document published on Overstock’s investor website, CEO Jonathan Johnson and chairwoman of the board Allison Abraham emphasized their expectations that the security token distribution will increase the liquidity and value of tZERO.
“We expect the Dividend will incentivize broker-dealers to participate in and connect with the tZERO platform,” the pair wrote, adding:
“[W]e believe the successful issuance of the Dividend will demonstrate to other issuers and market participants that this technology is scalable and has significant benefits to all market participants.”
tZERO processes just $8,700 in volume per day
The SEC filing asserts that the closing price for OSTKO tokens trading on tZERO on April 6, 2020 was $10.00. This suggests that the security token will be the largest token trading on Overstock’s trading system, with a market capitalization of $40.37 million.
But the last OSTKO trades executed on the platform appear to have occurred on March 20 — with OSTKO seeming to have only generated 92 tokens worth of trade in 2020 so far. And over half over them took place in a single day in March.
The only other token available for trade on tZERO is the exchange’s native security token, TZROP. This token produced $268,500 worth of trades in March, equating to just $8,700 in average daily volume.
With such thin liquidity on tZERO, the impact that an airdrop of 4 million tokens to OSTK holders will have on the platform remains to be seen.