Written by: Michael Markowski
As of the August 6, 2018 closing of its $250 million crypto security token offering, tZERO will become the global crypto infrastructure industry’s de facto leader. The price of its tokens and the share price of Overstock.com (OSTK[NSD] – $35.60 0.05 (0.14%), its parent company will multiply by 2021. This is not a function of luck. This is because Overstock.com and tZERO had the vision to anticipate the need for regulated crypto infrastructure. tZERO began in October 2017 to build an alternative trading system (ATS) that is dedicated to crypto security tokens. The following are my predictions for tZERO:
The tZERO Preferred Equity token will be recognized as “The Bitcoin” of crypto security tokens by 2019.
- tZERO, Inc. will become “The NYSE” for the trading of crypto security tokens.
- The company will be recognized as a unicorn company and valued for more than $1 billion within 12 months.
- The price of a token will increase from $10 to a minimum of $100 in 2019.
- By 2025, the aggregate value of tZERO and its outstanding tokens will be $50 billion and by 2030, $100 billion.
My predictions are based on the following:
- a) tZERO is first mover: tZERO is a first mover in crypto infrastructure which will become the world’s biggest digital industry by 2030. For more about first movers view video about them at the bottom of report.
- b) Crypto security tokens: The aggregate market cap of crypto security tokens will be substantially higher than the aggregate market cap of the cryptocurrencies by 2020. More than 90% of the 1,300 initial coin offerings (ICOs) from inception through the end of 2017 were actually, “crypto security tokens in disguise”. In August or September, tZERO will be the first and only regulated exchange wherein all these crypto security tokens can be legally traded.US based Coinbase is considered to be the leading US cryptocurrencies exchange. However, it does not have a license to transact crypto security tokens and it supports only four of the existing cryptocurrencies. tZERO does not plan to support cryptocurrencies.
- c) Existing ecosystem antiquated: The aggregate market cap of crypto token security will exceed the aggregate market cap of all global equities by 2030. Blockchain will replace the antiquated ecosystem of paper shares and transfer agents, a system which has been in place since the beginning of time.
- d) Desperate need for crypto infrastructure: The crypto community desperately needs regulated infrastructure. From 2009 through 2016, crypto was able to capture innovators. This accomplishment met the first requirement for any new product or technology to gain acceptance vis-à-vis the product adoption cycle. See chart below. In 2017, crypto began to gain acceptance with early adopters. However, the acceptance has now reached a chasm. This challenge was caused by the need for regulation born of crypto fraud and hacking of the unregulated crypto exchanges. With tZERO’s ATS becoming operational subsequent to the close of its token offering, crypto will cross the chasm. tZERO will put crypto and blockchain back on the path to become ubiquitous. It is recommended that you watch the video found at the end of this report entitled, “Crypto’s Wild West”. Read my report entitled, “Cryptocurrency Community In Desperate Need Of Regulated Infrastructure”.
- e) Overstock.com: tZERO’s majority shareholder, at 80%, is Overstock.com; which has been on the forefront of crypto and blockchain. Overstock.com was the first major online retailer to accept cryptocurrencies in 2013. Not only that, Overstock.com was the first to raise capital through blockchain with its 2016 stock offering. Overstock.com plans to sell its online retail business in order to concentrate 100% on crypto and blockchain.
- f) Patrick Byrne: The founder and CEO of Overstock.com is Patrick Byrne, a true digital visionary. Overstock.com has grown to $1.7 billion in annualized revenue since it was founded in 1997. Byrne is the world’s foremost expert at understanding the need that emerging growth companies have for crypto and blockchain. Dr. Byrnes knowledge and wisdom are not purely academic or hypothetical; some of it is earned in the trenches of business warfare. Overstock.com came away with a settlement of $20 million from a lawsuit that it filed against Merrill Lynch and Goldman Sachs for illegally selling its shares short. Dr. Byrne is singular in his role as spokesperson espousing the rationale for crypto security tokens and blockchain to replace the existing antiquated ecosystem in order to provide capital and liquidity for emerging growth companies.
- g) GSR Capital: tZERO recently announced that GSR Capital was purchasing $160 million of the tokens available in tZERO’s $250 million token offering. Hong Kong based GSR is one of the world’s foremost visionary investors. In 2012, GSR was the first VC to invest in Didi Chuxing, China’s UBER. Didi, now valued at $56 billion, ranks as the second most valuable unicorn company, trailing only UBER. GSR’s capital, contacts and visibility insures that:
- tZERO will be the “UBER” of crypto infrastructure.
- The tZERO Preferred Equity tokens will become the “Bitcoin” of the world’s security tokens.
- tZERO will be valued for a minimum of $1 Billion and will join the list of the world’s unicorn companies by 2019.
- h) Dodd Frank: The inevitable result from the enactment of the Dodd Frank Act will be the complete disintegration of the US stock market. The act has already decimated the ecosystem for publicly traded small and micro-cap companies that had been in place since the SEC was formed in 1933. It will eventually do the same for midcap companies with market caps of less than $1 billion. Crypto and blockchain, along with the new laws and regulations that were enacted by the JOBS Act, will fill this void. See my article “Dodd Frank: Boon for Large Caps, Bust for Micro-caps”.
- i) Secular Bear market on horizon: Both the economic expansion and secular bull market, which began in 2009 are long in the tooth. Equities, by most standards, are near their highest relative valuations. The likely outcome will be a minimum decline of 50% and an eight to fifteen-year secular bear market. For more information about secular bull and bear markets go to www.bullsnbears.com. During a long secular bear market the public will become increasingly frustrated with stocks. Crypto security tokens will become the preference for investors to invest in emerging growth companies and technologies. Additionally, by the time the secular bear market ends, presumably around 2030, crypto security tokens will be the preference for investors looking to invest in dividend paying companies.
- j) Crypto infrastructure larger than brick and mortar: The aggregate value of world’s existing infrastructure providers for the financial markets ecosystem depicted in the table below was most recently $605.7 billion. My prediction is the aggregate value of the crypto infrastructure providers will exceed the brick and mortar providers by 2025. The erosion of the aggregate value for the existing financial markets infrastructure providers will happen similarly to erosion of the value of the world’s transportation industry which was caused by UBER, etc. Eventually, those existing brick and mortar financial markets’ infrastructure providers who do not transform to the crypto and blockchain will cease to exist. Since tZERO is the leader of the crypto infrastructure industry, the aggregate valuation of it and its tokens should be at least $100 billion by 2025.
The key questions are: what will the valuation be for tZERO, Inc., and what will be the price of its security token. According to tZERO’s token offering prospectus, it’s going to pay its token holders 10% of its adjusted gross revenue. To determine the effect of the 10% payment on tZERO, I examined the financial statements for the Intercontinental Exchange. The Intercontinental Exchange (ICE) is the owner of the NYSE, the world’s largest stock-exchange. ICE is the ideal comparison for tZERO since it includes adjusted revenue in its Financial Statements. For 2017, ICE also paid a dividend which represented approximately 10% of its adjusted gross revenue. The first table below depicts the net post dividend payments profits for ICE in 2017. The second table is an example of what tZERO’s net post token payments profits would be assuming that its generates revenue comparable to ICE.
Should tZERO, in the future, produce revenue that is comparable to ICE’s 2017 revenue; its valuation could potentially be equivalent to ICE’s most recent market valuation of $44 Billion. Additionally, the argument could be made that tZERO would fetch a higher relative valuation than ICE. Given tZERO utilizes blockchain, it should be much more profitable than ICE.
Here are the reasons why tZERO, Inc., will be valued for $1 billion by 2019, and for $10 billion by 2021:
- First mover advantage: tZERO has a solid first mover advantage becoming the world’s largest token security exchange. Watch the video at end of this report entitled, “Why companies qualifying as a “First Mover” have the potential to get to $1 billion valuations almost instantly”.
- 1,000+ crypto security token issuers: There are more than 1,000 crypto security that have been issued which presently do not have an SEC approved exchange or platform to trade on. All of these orphaned security tokens need a regulated ATS or exchange to affiliate with quickly. To put this into perspective, the NYSE presently has 2800 listings.
- Significant paid in equity capital: tZERO, by August 6, 2018, will have between $250 million and $300 million of paid in equity capital. Given the capital along with the huge and immediate need to be filled, tZERO very quickly will rank among the fastest growing companies in the world.
What gets interesting is the potential pricing for tZERO token. The tokens will receive income that is equivalent to 1/10th of tZERO’s gross revenue. With the prospects for tZERO to grow in excess of 100% annually for the foreseeable future, I predict that when tZERO reaches scale, its tokens will trade at 100 times or more relative to their annual payments. The security token payments have a huge advantage over dividends. They are not subject to double taxation since they are not paid from a corporation’s net income. Based on ICE’s current dividend yield of 1.3%, it shares are trading at more than 71 times its dividend payment.
The next question is what will the tokens be valued for until tZERO makes the first payments? My prediction is that aggregate valuation of the tokens should be at $1 billion by 2019 and $10 billion by 2021. With between 30 million and 35 million tokens outstanding after the offering a token will probably be valued for between $285 and $330 by 2021.
Since Overstock.com is the 80% owner of tZERO, its valuation will increase to a valuation that is relevant to tZERO’s. Based on its current shares outstanding, Overstock.com shares could potentially be above $300; equivalent to an eight-fold increase from their most recent price of $38 by 2021.
Finally, the tZERO Preferred equity token and its offering will soon be recognized as the textbook case for utilizing crypto security tokens to raise capital. The revenue sharing tokens provide corporations and investors with significant advantages over the antiquated shares which pay doubly taxed dividends.
There are two other crypto infrastructure opportunities that we have identified which have the potential to multiply by 7 and 35 times upon reaching $1 billion valuations by 2021. For access to the research and videos on them and how to invest register for a FREE TRIAL membership to Dynasty Wealth.com.
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