GameStop, the well-known video game retailer, saw its shares take a hit, tumbling over 8% during after-hours trading on Wednesday. This decline followed the company’s announcement of plans to raise $1.3 billion to invest in Bitcoin by issuing convertible senior notes.
Interestingly, this decision comes just a day after the market experienced a nearly 12% leap in GameStop shares. The surge was triggered by the company’s announcement that its board had unanimously updated its investment policy to include Bitcoin as a treasury reserve asset.
### GameStop’s Bitcoin Venture
GameStop’s move towards Bitcoin investment is the latest in a series of steps by the company to delve into the world of cryptocurrency. Rumors started swirling about a month ago, suggesting that GameStop was eyeing opportunities in digital currencies.
The buzz reached a fever pitch on February 8, when GameStop CEO Ryan Cohen posted a social media update featuring a photo of himself with Michael Saylor, CEO of MicroStrategy. MicroStrategy is famed for its massive Bitcoin stash, holding more than 447,000 BTC tokens.
Saylor’s bold Bitcoin strategy has paid off handsomely, with MicroStrategy’s stock value soaring by over 84% in the past year, thanks in large part to the rising tide of Bitcoin prices. Despite this success, analysts on Wall Street are treading cautiously regarding GameStop’s ability to mimic MicroStrategy’s achievements.
### Wall Street’s Cautious Take
Wedbush analyst Michael Pachter voiced his concerns, saying, “The company’s strategy has flipped about six times in three years. Now, they’re venturing into cryptocurrency, aiming to follow MicroStrategy’s footsteps.”
Pachter also doubted the feasibility of GameStop’s approach, citing the example of MicroStrategy’s shares trading at about twice the value of its Bitcoin holdings. He commented, “If GameStop used their entire $4.6 billion in cash for Bitcoin and traded at twice their Bitcoin holdings, their stock would lose five bucks.”
Adding to the skepticism, GameStop released its fourth-quarter earnings after the market closed on Tuesday, reporting $1.28 billion in net sales, a notable 28% drop from the same quarter the previous year.
For the complete fiscal year, GameStop reported an adjusted EBITDA of $36.1 million, down from $64.7 million the year before.
Wall Street’s unease is further fueled by Bitcoin’s notorious volatility. The cryptocurrency recently retraced over 25% from its January peak of $109,000 during a market rally. It slid toward $76,000 by March 11th, a level unseen since November 2024. However, Bitcoin has since rebounded to hover around $87,477, marking a 4.5% uptick over the past two weeks.
(Image credit: DALL-E, chart credit: TradingView.com)
