What happened
Shares of online retailer Overstock.com (BYON 3.88%) jumped on Monday after Morgan Stanley reported a large passive stake in the company. The stock may also be benefiting from the launch of the first bitcoin futures contracts on Sunday. Overstock owns a substantial quantity of bitcoin, and announced plans for an exchange for trading cryptocurrencies and its own initial coin offering earlier this year. Shares of Overstock were up about 22% at 11:45 a.m. EST.
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So what
Overstock's core business is e-commerce, but speculators have been focused the company's various cryptocurrency announcements over the past few months. The stock has gained about 240% since Aug. 1.
Morgan Stanley reported an 11.4% stake in the company on Monday, one factor that is likely driving the stock higher. This comes one day after the Chicago Options Exchange launched its high-anticipated bitcoin futures, bringing the cryptocurrency further into the financial mainstream.
Now what
Overstock's market capitalization now sits at roughly $1.4 billion. The company posted a net loss of $11 million over the trailing-12-month period, and has lost money on an operating basis in four of the past 10 years. It's operating margins hover around 1% in its best years.
In other words, the surge in the stock this year has exactly nothing to do with the company's performance. Investors are betting that Overstock's cryptocurrency efforts will pay off in the long run, or that the ongoing cryptocurrency mania will continue to push up shares in the short run. That strategy worked on Monday.
