Shares of GameStop (GME) experienced a decline of over 8% in after-hours trading on Wednesday following the company’s announcement of its intent to raise $1.3 billion through a convertible senior notes offering, with the primary goal of purchasing bitcoin (BTC-USD). This news arrived a day after GameStop’s stock price surged by nearly 12% on the heels of the video game retailer, a prominent meme stock, stating that its board had “unanimously approved an update to its investment policy to add Bitcoin as a treasury reserve asset.” The prospective bitcoin investment surfaces roughly a month after CNBC reported GameStop’s exploration into cryptocurrency investments. Despite the significant stock appreciation witnessed by MicroStrategy due to its substantial bitcoin holdings, Wall Street strategists remain cautious about whether GameStop’s foray into bitcoin will translate to similar stock gains. Concurrently, GameStop also released its fourth-quarter earnings report on Tuesday after the market closed, revealing a 28% decrease in net sales compared to the same period the previous year.
GameStop (GME) stock witnessed a notable downturn in after-hours trading on Wednesday, plummeting by more than 8%, as the company unveiled an ambitious financial maneuver: a plan to raise up to $1.3 billion through the issuance of convertible senior notes, with the principal objective of acquiring bitcoin (BTC-USD).
This announcement followed a day of considerable upward momentum for GameStop’s shares, which had climbed nearly 12%. The prior surge was sparked by the video game operator, a stock frequently associated with meme-driven trading, disclosing that its board of directors had given unanimous approval to revise its investment policy to include Bitcoin as a component of its treasury reserves.
The potential foray into bitcoin investment comes approximately one month after reports from CNBC indicated that GameStop was actively investigating opportunities within the cryptocurrency space. Earlier, on February 8th, a social media post by GameStop CEO Ryan Cohen, featuring a picture with MicroStrategy (MSTR) CEO Michael Saylor, ignited speculation regarding GameStop’s potential interest in digital currencies. MicroStrategy, under Saylor’s leadership, has famously aligned its corporate treasury with bitcoin, amassing over 447,000 tokens as of a February filing.
It is worth noting that MicroStrategy’s bitcoin-centric strategy appears to have yielded significant positive results, with the company’s stock price soaring by over 84% in the past year, buoyed by the rising value of bitcoin. However, Wall Street analysts express reservations about drawing a direct parallel to GameStop’s situation and predicting a similar upward trajectory for its stock.
Michael Pachter, an analyst at Wedbush Securities, commented, “The problem with that thinking is MicroStrategy trades at about two times their bitcoin holdings. If GameStop were to buy all bitcoin with their $4.6 billion in cash and trade at two times [their bitcoin holdings,] the stock would drop five bucks.”
In addition to the bitcoin-related announcement, GameStop also released its financial results for the fourth quarter after the closing bell on Tuesday. The report showed net sales of $1.28 billion for the quarter, marking a substantial 28% decrease from the $1.772 billion reported in the corresponding period of the previous year. For the full fiscal year, GameStop reported an adjusted EBITDA of $36.1 million, down from the $64.7 million recorded in the prior year.