GameStop Issues Convertible Notes, Expands Bitcoin Holdings
According to a company press release cited by the Associated Press, GameStop intends to issue these debt securities, which carry a maturity date of 2032 and do not have anticipated interest payments. The notes, however, may convert into shares of GameStop common stock, contingent on defined terms yet to be finalized by the company.
While GameStop stated in early May it purchased 4,710 Bitcoin, the company did not explicitly confirm this was the primary use for the proceeds from this new debt offering. The primary stated purpose for the funds raised from these notes is for “general corporate purposes, including making investments consistent with GameStop’s investment policy, which now permits Bitcoin as a Treasury Reserve Asset, and potential acquisitions.”
The timing of this news coincides with statements from GameStop CEO Ryan Cohen, who previously signaled interest in diversifying into digital assets, potentially influenced by the crypto strategy of the company’s chairman, Michael Saylor. Strategy, a prominent holder of corporate Bitcoin reserves, which began accumulating significant BTC holdings in 2020, appears to be a key player in GameStop’s potential investment landscape.
“The company will use the net proceeds from the offering for general corporate purposes, including making investments in a manner consistent with the GameStop’s investment policy and potential acquisitions,” the press release indicated.
Market Reaction:
GameStop shares responded negatively to the Bitcoin-related news following this announcement. In after-hours trading initiated by the news, the stock price dropped approximately 10%, settling at $25.64.
Since GameStop disclosed its $512 million Bitcoin purchase via an announcement on March 26, its market capitalization has decreased by roughly 9.5% from a trading close of $28.36.
*(The independent value of 4,710 Bitcoin, likely acquired between May 3rd and June 10th, represents approximately $512 million at press time, suggesting the funds raised from note sales exceed the initial Bitcoin allocation).*
In its latest earnings report published last month, GameStop disclosed holdings of nearly $4.7 billion in cash equivalents – a substantial increase compared to its position at the same time a year prior.
“Our updated investment policy facilitates the strategic inclusion of Bitcoin aligned with our treasury management objectives,” stated a company representative referencing the March announcement.
