GameStop Corp. (NYSE: GME) shares tumbled 22% on Thursday, marking their biggest one-day drop since June, as the company’s bold plan to finance a bitcoin acquisition through a $1.3 billion convertible bond offering rattled investors. The move, aimed at holding bitcoin as a treasury reserve asset, has sparked questions about the timing and viability of GameStop’s pivot, especially as its core retail business continues to struggle.
Bitcoin Pivot Fails to Impress Investors
GameStop’s decision to embrace bitcoin initially generated excitement among retail traders, many of whom closely follow the meme stock saga. However, the euphoria quickly faded after the company announced the closure of a “significant number” of additional stores this year. This signaled that GameStop’s brick-and-mortar business remains in decline, despite its efforts to transform.
The plan to purchase bitcoin through the zero-coupon convertible bond issuance, maturing in 2030, drew skepticism from investors and analysts alike.
“Investors are not necessarily optimistic on the underlying business,” said Bret Kenwell, US investment analyst at eToro. “There are question marks with GameStop’s model. If bitcoin is going to be the pivot, where does that leave everything else?”
Timing of the Move Raises Red Flags
The timing of GameStop’s bitcoin pivot has also come under scrutiny. The company is making the move after bitcoin prices have already surged 27% since the November presidential election, though the cryptocurrency remains far below its all-time highs.
Analysts questioned why GameStop waited so long to make this strategic shift.
“Why did (GameStop) wait so long if they were going to go down this road? Six months ago, nine months ago would have made a lot more sense,” Kenwell added.
By delaying the move, GameStop risks buying into the bitcoin market at elevated levels, which could make the investment far less profitable.
Convertible Bonds Mimic MicroStrategy’s Playbook
The $1.3 billion debt offering echoes the strategy of MicroStrategy Inc. (NASDAQ: MSTR), one of the largest individual holders of bitcoin. MicroStrategy has frequently issued convertible debt to fund bitcoin acquisitions, effectively becoming a bitcoin proxy on the stock market.
However, unlike MicroStrategy—which already had a substantial bitcoin portfolio—GameStop’s abrupt entry into crypto raised concerns about its business direction. With store closures continuing and retail struggles mounting, the pivot to bitcoin reserves seems more like a desperate move than a well-thought-out strategy.
Crypto Market’s Tepid Response
Despite GameStop’s high-profile announcement, the crypto market showed little enthusiasm. Agne Linge, head of growth at decentralized bank WeFi, noted that the move had “failed to meaningfully boost market confidence.”
The lack of excitement indicates that GameStop’s bitcoin gamble did not generate the bullish sentiment the company may have hoped for.
GameStop’s Stock Performance Woes
Following Thursday’s drop, GameStop shares closed at $22.09, erasing all of the gains from the previous day. With the latest plunge, GME stock is now down 30% for the year, reflecting investors’ waning confidence in the company’s turnaround efforts.
The Bottom Line
GameStop’s bitcoin pivot appears to have backfired, with investors viewing the move as a desperate attempt to reignite interest in the struggling retailer. The company’s reliance on convertible debt to fund the crypto play has raised questions about its long-term business prospects, especially as it continues to close stores.
While bitcoin exposure could add some speculative upside, the timing and execution of the plan have drawn skepticism, leaving GameStop’s future as uncertain as ever. For now, GME stock continues to face pressure as its crypto gamble fails to win over the market.
