GameStop has experienced a sharp decline in stock price following its announcement of plans to sell $1.75 billion in convertible notes. The funds will be allocated for general corporate purposes, including cryptocurrency purchases, specifically Bitcoin.
GameStop Stock Plunge
Immediately after the news broke, GameStop's stock fell over 15% in premarket trading and then dropped an additional 4% after the bell, resulting in a 19% decline at press time. This came on the heels of a prior 5% drop due to declining sales.
Bitcoin Purchase Strategy
GameStop aims to replicate MicroStrategy's strategy, which has added substantial Bitcoin holdings through various securities, including convertible debt. In April, GameStop added 4,710 bitcoins to its balance sheets, valued at over $500 million at the time. CEO Ryan Cohen noted that acquiring Bitcoin serves as a hedge against certain economic risks.
Market Skepticism
Overall, the market is skeptical of GameStop's strategy. Analysts point to a significant revenue decline of 17% year-over-year in Q1 2024. GameStop's previous attempt to enter the NFT space also failed, and the NFT team was disbanded in December 2022. The NFT marketplace is set to close in February 2024. Investors and analysts express doubts about the wisdom of purchasing volatile assets such as Bitcoin when the company's revenue from core operations is dwindling.
Currently, the market does not support GameStop's strategy of delving into Bitcoin, given the stock's decline and negative investor sentiment regarding the company's ongoing financial issues.
