GameStop’s shares rose 11.7% last Wednesday after revealing it had adopted Bitcoin as a treasury reserve asset, but then fell 22.1% the following day after issuing $1.3 billion in convertible debt, with the proceeds to be used in part to buy the cryptocurrency.
GameStop helped ignite a “meme” stock craze in early 2021, when GameStop’s stock price soared above $120. Shares are now trading at about $22 as the core video gaming business continues to face intense competition from digital gaming and streaming.
The retailer last week reported sales for 2024 reached $3.8 billion, tumbling 27.5% year-over-year. Cost reductions enabled GameStop to post an operating profit in the year.
Since Ryan Cohen took over as CEO in 2023, GameStop has been streamlining the business, closing stores and selling some international operations. Last year, it closed 966 stores, ending with 3,203.
Going forward, GameStop said in its 1O-K that beyond cost reductions, its focus is on improving omnichannel offerings and expanding offerings and services, including collectibles. However, it also plans to close a “significant number of additional stores” in 2025, indicating the core business continues to flounder.
One bright spot is its $4.8 billion cash position at year-end as GameStop benefited from timely equity offerings during one of the stock’s volatility episodes in 2024.
GameStop’s updated investment policy comes as the price of Bitcoin, the world’s largest cryptocurrency, soared past an all-time high in December following the election of President Donald Trump, who has vowed to make the U.S. “the crypto capital of the world.”
GameStop joins the ranks of Strategy (formerly Microstrategy), Metaplanet, and Samara Asset Group as the fourth publicly listed company to issue debt to purchase Bitcoin. Strategy, the world’s largest corporate holder of Bitcoin, has seen its shares climb along with the crypto’s gains.
Even more companies with large cash balances are adopting Bitcoin as a treasury reserve to diversify assets, hedge against inflation, and enhance business transaction flexibility. Adam O’Brien, CEO of Bitcoin exchange Bitcoin Well Inc., told MarketWatch, “It gives these companies an opportunity to breathe and figure out how to innovate. Over the next decade, companies will realize that bitcoin is a safe haven for capital over the long term.”
Nick Ward, a contributor to Bitcoin Magazine, wrote, “For CFOs thinking in 3, 5, or 10-year increments, the case for allocating even a small portion of excess cash to Bitcoin is no longer fringe.”
However, GameStop’s share collapse following news of the debt offering, which came at a big premium to the company’s value, shows many on Wall Street aren’t convinced.
Michael Pachter, an analyst at Wedbush who has long had an “underperforming” rating on GameStop, stated in a note, “We find it hard to understand why any investor would be pay more than two times cash value for the potential for GameStop to convert that cash into Bitcoin, particularly since the same investors can invest in Bitcoin or a Bitcoin ETF themselves.”
GameStop said Bitcoin purchases could expose it to volatility associated with cryptocurrency prices. Bitcoin prices are now about 20 percent off their recent highs.
