GameStop announced plans to invest $1.3 billion in Bitcoin, resulting in an unexpected 25% stock decline.
GameStop's Bitcoin Strategy
GameStop announced the issuance of $1.3 billion in convertible bonds to fund Bitcoin purchases, reflecting strategies by MicroStrategy and Marathon Digital Holdings. These bonds allow investors the option to convert to shares in 2030.
Shareholder Risks
While the bonds provide GameStop with cash without interest payments until 2030, shareholders face a $1.3 billion dilution risk as bondholders hedge by shorting stocks, putting pressure on share prices.
Bitcoin Price Threshold for Stock Growth
For significant stock growth, Bitcoin needs to exceed $110,000, which would counteract bondholder selling pressure. Similar scenarios exist with MicroStrategy and Marathon, where stocks trade below thresholds due to hedging pressure.
Amid current stock price fluctuations, companies like GameStop with Bitcoin investments remain pressured by bondholder hedging strategies.
