It seems GameStop is gearing up for their first foray into Bitcoin. The renowned video game retailer, famous for the meme stock saga, revealed on Tuesday their intention to venture into the Bitcoin market. successful completion This news follows their announcement of a $1.5 billion private round of convertible senior notes.
A portion of the funds raised is earmarked for purchasing Bitcoin, as part of the company's strategic plan.
GameStop Goes Crypto!
A new SEC filing reveals that the offering, finalized on April 1, attracted strong interest, enabling GameStop to sell an extra $200 million in notes, beyond their initial plan of $1.3 billion.
These notes, coming due on April 1, 2030, are unsecured liabilities for the company and bear zero percent in interest, meaning investors won't receive periodic interest payouts.
This strategy is reminiscent of how Strategy's playbook uses Bitcoin. Michael Saylor's firm frequently issues zero-interest convertible notes to raise funds without causing immediate share dilution, offering potential upside to investors through stock conversion opportunities.
The convertible note structure allows holders to potentially convert their debt into shares of GameStop's Class A common stock under specific conditions.
Prior to January 1, 2030, the conversion option kicks in only if certain criteria, like GameStop's stock price hitting at least 130% of the conversion price, or a steep drop in note trading prices, are met.
Post-January 1, 2030, investors have the freedom to convert their notes anytime before they mature, irrespective of the aforementioned conditions. Once converted, GameStop retains the discretion to settle its commitments in cash, shares, or a mix of both.
The starting conversion rate is pegged at 33.4970 GameStop shares per $1,000 note principal, equating to an initial conversion price roughly set at $29.85 per share.
Debt For Bitcoin
Although GameStop cannot redeem these notes before April 6, 2028, it may opt for redemption afterward if its stock price surpasses a predetermined level. Conversely, noteholders have the right to demand a repurchase by GameStop on April 3, 2028, or should there be radical changes in the company's structure.
GameStop initiated this private offering on March 26, having already solidified its Bitcoin investment intentions, and holding $4.75 billion in cash, similar instruments, and marketable securities as of February 1.
February marked GameStop's first public declaration of its interest to delve into Bitcoin, as CNBC highlighted. At that time, they were also contemplating investments in other cryptocurrencies potentially worthwhile to add to their financial reserves.
In early February, GameStop's CEO Ryan Cohen reportedly met with Strategy's Saylor, although specifics weren't shared. However, post the meeting, discussions around Bitcoin acquisitions and note offerings emerged.
Saylor and Strategy have charted the path for many firms, both big and small, domestic and international, to begin hoarding Bitcoin reserves. Noteworthy examples include Rumble, a platform for video sharing and cloud services, and Metaplanet, listed on the Tokyo Stock Exchange and often dubbed “Asia’s Strategy.”
Rumble, in November 2024, unfurled plans to invest up to $20 million from its cash trove in Bitcoin. This direction followed CEO Chris Pavlovski’s survey, seeing an overwhelming 93.9% vote in favor.
By March, the company made its initial Bitcoin purchase, acquiring about 188 Bitcoins at an approximate price of $91,000 each, culminating in a $17.1 million transaction.
GameStop's Stock Dips After Announcing Bitcoin Plans
GameStop's shares (GME) saw a jump after disclosing its inaugural Bitcoin venture, only to plunge more than 20% shortly afterwards.
Experts attribute the dip to varied reasons, but a prevailing thought is that investors remain doubtful about whether GameStop's pivot towards Bitcoin aligns with shoring up their struggling retail facet.
Over the past year, GameStop has shuttered in excess of 1,000 locations, adjusting to the digital gaming tide and rising rivalry from online market players. Transitioning to this new digital model has proven challenging for their traditional retail setup.
Following the initial buzz among retail traders, renowned for chasing GameStop as a “meme stock,” skepticism has crept in. They are wary of whether this Bitcoin tangent can indeed bolster or sustain the company's core business operations.
