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DISCONTINUED OPERATIONS
 6 Months Ended
Jun. 30, 2021
Discontinued Operations and Disposal Groups [Abstract]  
DISCONTINUED OPERATIONS
3. DISCONTINUED OPERATIONS

On January 25, 2021, we entered into the Transaction Agreement with Medici Ventures, Pelion, and Pelion, Inc., pursuant to which the parties agreed, among other things, that: (i) Medici Ventures would convert to a Delaware limited partnership (the "Partnership"), (ii) pursuant to the terms and subject to the conditions of a Limited Partnership Agreement which was entered into on the date of the Medici Closing, Pelion would become the sole general partner of the Partnership, and we (along with any other stockholders of Medici Ventures at the time of the Medici Closing), would become the limited partners of the Partnership, (iii) prior to the Medici Closing, Overstock would convert the outstanding intercompany debt owed to us by Medici Ventures into shares of common stock in Medici Ventures; and (iv) prior to the Medici Closing, Overstock would convert the outstanding intercompany debt owed to us by tZERO into shares of common stock in tZERO, in each case, on the terms and subject to the conditions set forth in the Transaction Agreement and the relevant definitive agreements to be entered into in connection therewith. Pursuant to the terms of the Limited Partnership Agreement, we and any other partners subsequently admitted to the Partnership agreed to make a capital commitment of $45 million to the Partnership in proportion to our equity interest in the Partnership in order to fund the Partnership's capital needs. The capital commitments may be called in one or more cash installments as specified by the general partner upon ten business days' prior written notice. The term of the Partnership is eight years. The debt conversion outlined in (iii) and (iv) above was completed during the quarter ended March 31, 2021, following which Medici Ventures and Overstock held approximately 42% and 41%, respectively, of tZERO's outstanding common stock.

The Transaction Agreement represents a strategic shift for Overstock and a substantive change in the purpose and design of Medici Ventures and its interplay with Overstock’s overall business objectives. The Overstock board of directors has determined that it is in the best interest of Overstock and its shareholders to have the Overstock management team focus on Overstock’s core e-commerce home furnishings business and strategies. Accordingly, after six years of committed effort to advance blockchain technology, Overstock has determined that the Medici Ventures businesses will be better served under the management of Pelion, a professional asset manager with technology expertise in early-stage companies. From and after the Medici Closing, Pelion has sole authority and responsibility regarding investing decisions, appointing board members of the portfolio companies, and exercising all shareholder rights for assets held by the Partnership, with the intent of generating capital appreciation for the held entities and investment income for the partners.

On April 23, 2021, we entered into the Limited Partnership Agreement with Pelion, as part of the Medici Closing, pursuant to which Pelion became the sole general partner, holding a 1% equity interest in the Partnership, and Overstock became a limited partner, holding a 99% equity interest in the Partnership. The Partnership meets the definition of an investment company under ASC Subtopic 946 - Financial Services - Investment Companies. As a result of this transaction, we
performed an assessment of control under the VIE model and determined that upon closing of the transaction, we held a variable interest in both Medici Ventures and tZERO which meet the definition of variable interest entities; however, we are not the primary beneficiary of either entity for purposes of consolidation as we do not have the power (either explicit or implicit), through voting rights or similar rights, to direct the activities of the Partnership or tZERO that most significantly impact its economic performance. Pelion was not a related party at the time of the transaction and apart from their capacity as the general partner of the Partnership, we have no other relationship with them. We may not voluntarily withdraw from the Partnership without the consent of the general partner or upon certain limited events as outlined in the Limited Partnership Agreement. Any proceeds from the sales of assets by the Partnership will be allocated on an asset-by-asset basis to the partners of the Partnership in accordance with the Limited Partnership Agreement following such events.

At the transaction date, our retained equity interest in the Partnership and our direct minority interest in tZERO had a fair value of $288.8 million, inclusive of $3.4 million of capital calls funded at the transaction date. The fair value of these equity securities at the transaction date was estimated by taking the mid-point from a valuation range using a weighting of multiple valuation techniques on the underlying components of the equity securities to calculate a fair value for the whole, including discounted cash flow models and market transactional data, both of which incorporate significant unobservable inputs (Level 3). Approximately $149.9 million of the total $288.8 million Level 3 equity securities have been valued using unadjusted inputs that have not been internally developed by management, including third-party transactions and quotations. The significant unobservable inputs used in the $288.8 million fair value measurement of these Level 3 equity securities at the transaction date are summarized as follows:
Valuation techniqueUnobservable inputsRange (1)Weighted average (2)
Market approachEnterprise value to revenue multiple
0.88x
0.88x
Discounted cash flows - exit multipleDiscount rate
9.0% - 35.0%
32.4%
Enterprise value to revenue multiple
0.75x - 5.00x
4.40x
Projected terminal year2023 - 20272025
Annual revenue growth rate
1.3% - 124.0%
109.4%
Annual EBITDA % of revenues
5.2% - 41.2%
36.3%
Discounted cash flows - perpetual growthDiscount rate30.0%30.0%
Projected terminal year20282028
Perpetual revenue growth rate3.0%3.0%
Annual revenue growth rate25.7%25.7%
Annual EBITDA % of revenues14.9%14.9%
 __________________________________________
(1)     — The range for the Annual revenue growth rate and Annual EBITDA % of revenues are based on the weighted average metrics for the annual periods of the separate cash flow models for the respective component.
(2)     — Unobservable inputs were weighted by the relative fair value based on the fair value of the underlying components subjected to the identified valuation technique. For projected terminal year, the amount represents the median of the inputs and is not a weighted average.

We recognized a $243.5 million gain upon deconsolidation of these entities which primarily relates to the remeasurement of our retained equity method interest in the Partnership and our direct minority interest in tZERO at fair value, which was included in our consolidated statements of income as part of Income (loss) from discontinued operations, net of income taxes. During the quarter ended June 30, 2021, we completed the entire funding of our $44.6 million capital commitment consistent with our proportional ownership interest

Our retained equity interest in these entities are classified as equity method securities as we can exercise significant influence, but not control, over these entities through holding more than a 20% interest in the entity. We will record our proportionate share of the Partnership's reported net income or loss, which reflects the fair value changes of the underlying investments of the Partnership, in Other income (expense), net in our consolidated statements of income with corresponding adjustments to the carrying value of the asset. There is no difference between the carrying amount of our investment in the Partnership and the amount of underlying equity we have in the Partnership's net assets. We have elected to apply the fair value option for valuing our retained direct minority interest in tZERO in future reporting periods as we determined that accounting for our direct equity interest in tZERO under the fair value option would approximate the same valuation approach used by the
Partnership for valuing our indirect interest in tZERO through the Partnership and would be the most meaningful and transparent option for evaluating our continued exposure to the economics of tZERO.

As of June 30, 2021, our 99% equity interest in the Partnership and the 40% direct minority interest in tZERO had a carrying value of $329.9 million which is included in Equity securities on our consolidated balance sheets, of which, $99.7 million is valued under the fair value option. This amount also constitutes our maximum exposure to loss as a result of our involvement in these entities as we have no additional financing obligations to these entities. There were no changes in the valuation of our equity interest in tZERO between the recognition date of April 23, 2021 and the period ended June 30, 2021. The operations of the Partnership post transaction date are not significant through the period ended June 30, 2021 and there were no equity method gains or losses associated with our equity interest in the Partnership through the period ended June 30, 2021.

Results of discontinued operations through the transaction date were as follows (in thousands):
Three months ended
June 30,		Six months ended
June 30,
2021202020212020
Revenue, net$1,802 $15,588 $17,394 $27,563 
Cost of goods sold1,325 13,618 13,716 23,959 
Gross profit477 1,970 3,678 3,604 
Operating expenses
Technology577 4,615 7,133 10,130 
Selling, general, and administrative2,084 7,109 13,509 16,067 
Total operating expenses2,661 11,724 20,642 26,197 
Operating loss from discontinued operations(2,184)(9,754)(16,964)(22,593)
Interest income, net5 390 192 473 
Other income (loss), net(398)(4,417)4,081 2,553 
Gain on deconsolidation243,541 — 243,541 — 
Income (loss) from discontinued operations before income taxes240,964 (13,781)230,850 (19,567)
Provision (benefit) for income taxes13,592 (323)13,604 (310)
Net income (loss) from discontinued operations$227,372 $(13,458)$217,246 $(19,257)
Less: Net loss attributable to noncontrolling interests from discontinued operations(134)(1,975)(335)(5,207)
Net income (loss) from discontinued operations attributable to stockholders of Overstock.com, Inc.$227,506 $(11,483)$217,581 $(14,050)
Assets and liabilities of discontinued operations were as follows (in thousands):
June 30,
2021		December 31,
2020
Cash and cash equivalents$— $21,075 
Other current assets— 13,054 
Total current assets of discontinued operations$— $34,129 
Property and equipment, net$— $8,783 
Intangible assets, net— 13,852 
Goodwill— 28,790 
Equity securities— 45,878 
Operating lease right-of-use assets— 7,226 
Other long-term assets, net— 1,626 
Total long-term assets of discontinued operations$— $106,155 
Accounts payable and accrued liabilities$— $11,939 
Other current liabilities— 1,985 
Total current liabilities of discontinued operations$— $13,924 
Operating lease liabilities, non-current— 7,099 
Other long-term liabilities— 586 
Total long-term liabilities of discontinued operations$— $7,685