Overstock Is in the Red, but Its Shares Are Soaring


OSTK -5.55%

shares have more than doubled over the past two months, one of the best gainers among U.S. stocks, even as the company struggles to turn around its retail business and find profits in its blockchain division.

Since trading at $9.55 on May 31, shares of the Utah-based retailer have risen 136%, rising as high as $23.40 on Tuesday. They closed at $21.27 on Thursday.

Only three publicly traded U.S. stocks of companies with market caps over $500 million—Alpha Investment Inc., Noble Vici Group Inc. and AiXin Life International Inc., all thinly traded—are up more than Overstock in the past two months. Even market darling Beyond Meat Inc. is up only 89%.

On Tuesday, Overstock surprised investors by declaring a dividend for its common stock. But it wasn’t a cash dividend. Rather, the company said that for every 10 shares of common stock, it will grant holders one share of a digital security tied to its blockchain-based online exchange, tZero.

That digital security isn’t registered with the Securities and Exchange Commission but was issued under an SEC rule that exempts certain securities from registration requirements.

The SEC declined to comment.

After years of running a steady—if slow-growing—business, Overstock’s fortunes flagged over the past two years. Its retail business lost money amid a fierce competition with rival Wayfair Inc. It had invested about $175 million into its blockchain division as of November, but the unit hasn’t posted a profit.

Overstock has lost money for nine consecutive quarters, dating back to the first quarter of 2017. Financial-services firm DA Davidson projects a loss of 92 cents a share for the company’s second-quarter financial report.

Overstock is slated to report second-quarter earnings on Aug. 8.

Overstock launched tZero in 2015, as founder and Chief Executive Patrick Byrne, a well-known bitcoin supporter, started integrating bitcoin into Overstock and building businesses like tZero based on the underlying blockchain technology. It has since made a series of other investments tied to blockchain and formed a unit called Medici Investments to manage it all.

With Mr. Byrne tying Overstock’s fortunes to blockchain, the company’s stock rose sharply in 2017, riding the hype over bitcoin. It traded as high as $85 in January 2018, not long after bitcoin hit a record in December 2017 of nearly $20,000. Both have fallen sharply from there.

Mr. Byrne declined to comment on the stock price. However, he said he believes the retail business has recovered—after cutting expenses by 25%, including layoffs, earlier this year—and its operations would support the blockchain businesses.

Write to Paul Vigna at paul.vigna@wsj.com

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