GameStop to borrow $1.3 billion to fund Bitcoin buying spree
The video-game retailer rallied after the company said on Tuesday that its board approved a plan to add Bitcoin as a treasury reserve asset. That was followed on Wednesday by a filing announcing the planned sale of the bonds, which will be used for general purposes, including the acquisition of Bitcoin.
The Grapevine, Texas-based GameStop joins a growing list of public companies taking on convertible debt to buy Bitcoin in an attempt to capitalize on upswings in the cryptocurrency. The tactic was pioneered by Saylor’s Strategy, the enterprise software company formally known as MicroStrategy, which has acquired more than $40 billion in Bitcoin and seen its share price soar.
A convertible bond is a hybrid instrument that allows the holder to convert the bond into a predetermined number of shares if the stock rises above a certain level. GameStop is marketing its notes, which are due in 2030, with a 35% to 40% conversion premium, according to people familiar with the deal who asked not to be identified because the information is private. The premium determines the price at which the conversion happens.
GameStop’s entry into the market comes even as investors appear to be growing more skeptical of the strategy. The premium that GameStop is looking to offer on its bonds is less than the roughly 55% premium on a similar issue from Strategy in November. More recently, Strategy made a $2 billion sale in February that offered investors a more advantageous 35% premium. That along, with the terms on a growing slate of debt-like instruments offered by Strategy, suggest that investors are demanding more from the company.
GameStop’s stock fell after the filing was released on Wednesday, erasing some of the gains from earlier in the day. The shares were down 6.7% to $26.44 as of 7:30 PM New York time in after-market trading.
A spokesperson for GameStop didn’t immediately respond to a request for comment.
GameStop’s push to quickly ramp up its Bitcoin purchases comes against a starkly different backdrop than when Strategy and other copycats flooded the market at the end of 2024. The cryptocurrency is down roughly 18% from an all-time high in January and investors are bailing on a variety of risky assets amid tariff uncertainty and choppy economic data.
Still, the tactic is appealing for GameStop because it has been looking to diversify away from an underlying business that’s slowed as the video game business goes digital. The retailer reported late Tuesday that it would be closing more stores after fourth-quarter revenue declined 28% to $1.28 billion from the year-ago period. Sales of hardware, accessories and software declined in the quarter, though collectible sales rose.
Cohen became the chairman of GameStop in 2021 — and CEO in 2023 — after an activist battle that helped turn the company into a meme stock at the height of the pandemic. Since then he has tried various strategies to revive the faltering company. The company announced in 2023 that Cohen would be allowed to use the company’s cash to buy stock in other companies. Recently, there has been anticipation among investors that GameStop might follow in Strategy’s footsteps after Cohen posted a picture of himself and Saylor on social media in early February.
A variety of companies ranging from medical tech providers to hotel developers have been inspired by the rise of Strategy. Its stock has increased over 2,600% since co-founder Saylor began investing the company’s cash into Bitcoin as a hedge against inflation in 2020. The cryptocurrency is up close to 700% over the same period.
Many companies have used corporate cash to purchase digital tokens. But a growing number have also taken the riskier route of taking on debt to fund the strategy. Convertible bonds can be more attractive for companies than share sales because the bonds don’t immediately dilute stockholders. The instruments have been popular with hedge funds because the securities make it possible to pursue a kind of arbitrage that capitalizes on the volatility of the underlying stock. GameStop could be particularly attractive to this crowd because of the volatility it has experienced since becoming a favorite of retail traders back in 2021.