GameStop Shares Plunge as the Company Announces a New Turn Toward Bitcoin Investment

A new turn toward Bitcoin investment sent GameStop shares sliding on Thursday, as the company announced a $1.75 billion convertible notes offering that could fund further purchases of the cryptocurrency.

The news that GameStop (NYSE:GME) is planning a $1.75 billion convertible notes offering sent shares of the company sliding in premarket trading on Thursday.

This move, which could fund further purchases of Bitcoin by the company, has triggered skepticism among investors amid broader concerns about GameStop’s weakening core business and potential dilution of existing shares.

The company stated that the proceeds from the offering would be used for general corporate purposes, which now include potential crypto investments.

“GameStop Corp. today announced that it intends to offer, subject to market conditions and other factors, $1.75 billion aggregate principal amount of 0.00% Convertible Senior Notes due 2032 in a private offering to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the ‘Securities Act’), and to certain members of the public in a private offering exempt from registration under the Securities Act,” the company announced.

The notes will be convertible into newly issued shares of GameStop common stock.

The company, which last month disclosed an investment of over $500 million in Bitcoin and a shift in its investment policy, added that the offering is expected to commence today, Thursday, May 4.

Shares of GameStop fell over 15% in the premarket trading following the news.

The drop comes a day after the stock declined 6% on weaker-than-expected quarterly earnings. GameStop reported a 17% year-over-year revenue decline to $732.4 million in the fiscal first quarter, highlighting the ongoing shift in consumer behavior toward online gaming and digital distribution.

The company’s net loss for the period also widened to $380.8 million, or $6.44 per share, compared to a net loss of $109 million, or $3.61 per share, a year ago.

GameStop appears to be taking cues from MicroStrategy (NASDAQ:MSTR), recently renamed Strategy, which is known for its bitcoin accumulation strategy financed through convertible debt.

This approach led to large gains in Strategy’s share price during bitcoin bull runs, but the stock has also experienced extreme volatility.

GameStop’s shift toward crypto investment adds another layer to the output, with potential gains in bitcoin feeding into the company’s stock price. However, this move could also open up avenues for opportunistic traders to manipulate the stock.