With $1.3 billion bet on Bitcoin, can GameStop's transformation bet win?

Author: Fairy, ChainCatcher

Edited by: TB, ChainCatcher

Yesterday, GameStop officially announced that it would include Bitcoin in its reserve assets, becoming the latest listed company to lay out cryptocurrencies. The veteran game retailer is trying to follow Strategy's successful experience and find breakthroughs when traditional business growth is weak.

From the "king of retail investors" to the "crypto believer", can GameStop's transformation bring new life?

GameStop 's transformation is lost

In Q4 2024, GameStop's net revenue increased, but its net sales fell by $511 million year-on-year, and closed 590 U.S. stores within one year. Wedbush analyst Michael Pachter once rated GameStop as "under-market" and set a target price of $10, pessimistic about its prospects.

The problem with GameStop ultimately lies in the fact that its core business is gradually being eliminated by the market. As a traditional retailer that relies on physical stores to sell game hardware, software and peripheral products, it has been ruthlessly marginalized under the impact of digital game downloads and the rise of e-commerce platforms. Faced with the reality of declining sales and shrinking stores, GameStop has no choice but to embark on a radical and variable transformation path.

In the past few years, GameStop has been trying to reshape itself: from promoting e-commerce business, adjusting investment strategies, and entering the NFT track, launching the NFT market and digital asset wallet. Pachter said bluntly: “GameStop’s strategy has been adjusted about six times in the past three years” and the company has been looking for new directions to survive.

Today, GameStop is betting on Bitcoin, trying to open up a whole new path to growth. This new bet may determine its ultimate destiny.

Imitate Strategy, bet on Bitcoin ****with $1.3

billion**** bonds

GameStop draws on Strategy's classic strategy - purchasing Bitcoin through issuing convertible bonds.

The company plans to issue 0.00% convertible premium notes of a total of US$1.3 billion in private placement, which will expire in 2030. To further attract investment, GameStop also grants initial buyers a 13-day option to allow them to purchase an additional note of up to $200 million.

This note is a general unsecured debt of GameStop, and will not incur regular interest and the principal will not accumulate. Investors may choose to convert the notes into cash, GameStop Class A common stock, or a combination of the two before maturity, with the specific conversion form at GameStop's sole discretion.

In the relevant documents, GameStop made it clear that its investment policies allow investment in certain cryptocurrency assets, including Bitcoin and US dollar stablecoins. In addition, GameStop further revealed that the company may invest part of the proceeds from cash, debt or equity financing in Bitcoin in the future, and does not set a limit on Bitcoin holdings, and may also sell the Bitcoin held.

As of February 1, GameStop's cash reserves were $4.77 billion, meaning the company has enough capital to make this strategic investment. This cross-border experiment of "Meme stock + cryptocurrency" has begun.

****Is it good for the crypto market, but not necessarily for

GameStop?****

After the news was announced, GameStop's stock price rose 11.65% during the trading session, but fell 7.40% from the closing price after the market. While this move has injected new vitality into the crypto market, investors are controversial about the prospects for GameStop's transformation.

Strategy's share price has risen 84% over the past year and has risen 23 times since it started buying Bitcoin in 2020. However, whether this feature can be copied on GameStop is still full of uncertainty.

"The problem is that Strategy is currently trading about twice its Bitcoin position. If GameStop buys Bitcoin with its $4.6 billion in cash and trades at a valuation of twice its Bitcoin position, its share price could fall by $5 instead."

Market observers' criticism is more blunt:

Community member @KaraxFX said: " This means ********GME cannot find an effective way to use its huge cash reserves to grow its business. In my opinion, this is negative. ”

Investor @MonkEchevarria said: "GameStop's move is really interesting, but Bitcoin cannot make up for its weak fundamentals. It is good to exceed expectations, but it cannot change its weak growth and weak cash flow. Price does not equal value, and hype does not equal strategy. From a perspective of more than three years, it is more like a desperate turn than a real transformation. "

Some even joked that GameStop is now a hedge fund.

GameStop's story always moves forward in subversion and controversy. Bitcoin may add a touch of color to GameStop's balance sheet, but it may not necessarily solve its business difficulties.

In this ever-changing story, the only thing that is certain is the uncertainty itself.