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GameStop Upsizes Convertible Debt Offering to $2.25 Billion
Video game retailer GameStop significantly increased the size of its latest offering of convertible senior notes, raising the total from the originally planned $1.75 billion to $2.25 billion, the company reported in a press release late Thursday.
Stock Depreciates Despite Fresh Capital Raise
While GameStop shares held relatively steady on Friday, they experienced a sharp decline of 24% throughout the week, closing at $22.14 according to Yahoo Finance. The stock saw some fluctuation connected to recent corporate announcements.
Focus Shifted Following Debt Announcement
The notice of the secondary bond offering, following a $1.5 billion raise in April, contributed to the stock drop earlier in the week. Additionally, shares were impacted when GameStop stated its ability to conduct Bitcoin purchases in late March.
Bond Terms & Company’s Stated Goals
- No interest will be paid on the latest batch of $2.25 billion convertible bonds.
- The conversion price is approximately $28.91 per share, representing a 32.5% premium compared to the company’s average Thursday stock price.
- This pricing strategy aligns GameStop with other firms, like MicroStrategy, aiming to grow their Bitcoin holdings by raising funds at a premium relative to their current crypto assets.
Recent Bitcoin Purchase?: Clarity Looms
Unlike firms such as MicroStrategy, which explicitly aims to maximize shareholder value by accumulating Bitcoin, GameStop’s future plans for the cryptocurrency are less defined.
GameStop purchased 4,710 Bitcoin last month. However, CEO Ryan Cohen indicated in a recent interview that the company did not plan to broadcast upcoming Bitcoin purchases and is not following other firms buying the leading cryptocurrency. Cohen also stated GameStop would not replicate the NFT marketplace they shut down last year.
Funds Proceeds and Strategic Focus
The company announced that the net proceeds from this offering will be used “for general corporate purposes, including making investments in a manner consistent with GameStop’s Investment Policy and potential acquisitions.”
Expanding Retail: Trading Cards Gaining Prominence
Citing the strong performance of trading cards (which accounted for 29% of first-quarter sales per Fortune), CEO Ryan Cohen emphasized the company’s focus shifting there.
“We’re focusing on trading cards as a natural extension of our existing business. The trading card market, whether it’s sports, Pokémon or collectibles, is aligned with our heritage,” Cohen recently stated.
Daily Debrief Newsletter – 27 Apr 2024
