Shares of Gamestop Fell 22% After the Retailer Issued Debt to Purchase Bitcoin

GameStop shares plummeted, marking their steepest decline since June, after the video game retailer revealed plans to raise debt to invest in Bitcoin.

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The stock plunged 22.1%, erasing the gains from the previous session, during which it had surged nearly 12%. The sharp reversal came after GameStop announced a plan to raise $1.3 billion through the sale of convertible senior notes maturing in 2030, with the proceeds earmarked for purchasing Bitcoin.

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Earlier in the week, GameStop’s board unanimously approved a strategy to invest in cryptocurrencies using its corporate cash reserves or future debt and equity issuances, mirroring a move made famous by MicroStrategy.

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As part of this latest fundraising effort, GameStop will issue 46 million additional shares linked to the convertible debt sale, increasing the company’s cash reserves to approximately $6.1 billion from the previous $4.8 billion, according to Wedbush analyst Michael Pachter.

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“We anticipate GameStop’s share price will decline further ahead of the convertible debt issuance, particularly since investors purchasing the notes will receive a zero-coupon bond and will need to believe in the longevity of the GameStop meme stock phenomenon over the next five years,” Pachter wrote in a client note.

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The analyst, who holds an “underperform” rating on GameStop, remains skeptical that the company’s Bitcoin investment strategy will yield the same success as MicroStrategy’s, citing the retailer’s already-elevated valuation.

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GameStop currently has a market capitalization of $12.7 billion—more than double the cash balance it will hold after completing the convertible debt offering. In contrast, MicroStrategy trades at less than twice the total value of its Bitcoin holdings.

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“With GameStop already valued at over twice its cash reserves, it is unlikely that converting that cash into Bitcoin will result in an even greater premium,” Pachter added.

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The move by GameStop reflects a growing trend among certain publicly traded companies seeking to incorporate cryptocurrency into their balance sheets. However, analysts and investors remain divided on whether this strategy will provide long-term benefits, especially given Bitcoin’s notorious volatility.

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MicroStrategy, led by its outspoken Bitcoin advocate Michael Saylor, has been one of the most aggressive corporate buyers of Bitcoin, amassing billions of dollars worth of the cryptocurrency. The company’s stock performance has often mirrored Bitcoin’s price movements, benefiting from the digital asset’s bull runs while suffering during downturns.

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GameStop’s pivot toward Bitcoin appears to be an attempt to capitalize on a similar strategy, potentially positioning itself as more than just a struggling brick-and-mortar video game retailer. However, unlike MicroStrategy, which generates significant revenue from its enterprise software business, GameStop lacks a comparable foundation outside of its retail operations.

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The decision to raise funds through convertible debt—securities that can be converted into company stock—has raised concerns among some investors. Issuing additional shares dilutes existing shareholders, potentially putting downward pressure on the stock price. Moreover, given the unpredictable nature of Bitcoin prices, GameStop’s ability to generate returns on its investment remains uncertain.

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Beyond its Bitcoin ambitions, GameStop has been a focal point in the broader meme stock phenomenon, driven by retail investors who rallied behind the company as part of a movement fueled by social media platforms like Reddit’s WallStreetBets. This fervor has led to extreme swings in GameStop’s stock price, often disconnected from its underlying fundamentals.

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Pachter and other skeptics argue that GameStop’s valuation is already inflated due to its meme-stock status, making it difficult for the company to justify further price appreciation solely based on a Bitcoin acquisition strategy.

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The impact of GameStop’s announcement rippled through the market, with some traders questioning whether the company’s pivot toward cryptocurrency signals a broader shift among other meme stocks or struggling businesses looking for alternative ways to deploy cash.

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Meanwhile, Bitcoin’s price remained relatively stable following the news, suggesting that investors in the cryptocurrency market were not significantly influenced by GameStop’s entry into the space.

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As GameStop moves forward with its debt issuance, analysts will closely watch how investors respond to the offering and whether the company provides additional details on its Bitcoin acquisition strategy. The success or failure of this move could shape future corporate decisions regarding cryptocurrency investments, particularly among non-technology firms exploring digital assets as a financial hedge.

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For now, GameStop’s stock remains highly volatile, and its latest maneuver has only added another layer of speculation to an already unpredictable trading environment.

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