GameStop Adds Bitcoin to Its Investment Policy, Shares Surge 10%

A significant beat for quarterly earnings put a rocket underneath GameStop's shares in pre-market trading.

GameStop shares soared 10% in the pre-market session on Tuesday after the company announced that its board had approved a plan to let the company invest in Bitcoin.

The video game retailer announced fourth-quarter earnings that beat estimates and also saw its same-store sales rise in the period.

Announcing the move in a very brief statement released alongside the results, the company said that its board had “unanimously approved an update to its investment policy to add Bitcoin as a treasury reserve asset”.

At 13:00 GMT, the shares were up 10% in the pre-market session at $27.89.

Meanwhile, investment analyst Dan Coatsworth at AJ Bell, comment on GameStop's earnings:

"A significant beat for quarterly earnings put a rocket underneath GameStop's (NYSE:GME) shares in pre-market trading. Its share-holders clearly believe the company is going to the moon and it's now one step closer, albeit the stock has a history of going up and down faster than a yo-yo.

"Retail operations aren't the reason why GameStop's shares are flying - they never are. This time it's about the company's move into bitcoin. The board has approved a plan to let the company invest in the cryptocurrency.

"In doing so, GameStop effectively positions itself as going down the same path as Strategy (formerly called MicroStrategy) (NASDAQ:MSTR) whose shares have become a proxy for the bitcoin price due to its large investment in the digital asset. No-one ever asks what MicroStrategy does day-to-day as a business, and increasingly the same could apply to GameStop.

"The company is also planning to create a new class A common stock to be used for internal equity grants and in acquisitions. This is in response to a request from a significant shareholder to provide the company with greater flexibility in making strategic investments.

"It will be interesting to see if this move has any impact on the stock price in the long run. However, given the stock's volatility and the strong demand for the stock, any positive news is likely to be welcomed by investors."

The company's revenue for the quarter came in at $2.23 billion, beating the average analyst estimate of $2.08 billion, according to Refinitiv. This compares to $2.14 billion reported for the same period a year ago.

Net loss for the period was $1.53 billion, or $7.95 per share, compared with a profit of $518 million, or $3.64 per share, a year ago.

Excluding one-time items, the company's earnings were $1.43 per share, while analysts expected $1.11 per share.

Same-store sales rose 3.3%, while analysts expected a decline of 8.7%.

Investors will be closely watching to see if the company's new chairman, Paul Harris, has any plans to step down from his role. Harris, the founder of private equity firm P7 Ventures, was appointed chairman in November after a tumultuous period for the company.

GameStop's stock price has soared in recent months, fueled by a meme stock rally and speculation about the company's new investment strategy. The stock is now trading at all-time highs.

The company is planning to create a new class A common stock to be used for internal equity grants and in acquisitions, it said in a statement on Tuesday.

The move follows a request from a significant shareholder for the company to have greater flexibility in making strategic investments.

"The board of directors has unanimously approved an update to the company's investment policy to add Bitcoin as a treasury reserve asset," GameStop said.

The company also announced preliminary fourth-quarter and full-year 2023 results that showed a smaller-than-expected loss and a rise in same-store sales.

The company is expected to report its full fourth-quarter and full-year 2023 results on or about 1 March 2024.

"We are pleased to report strong fourth-quarter and full-year 2023 results that exceeded expectations," said Mike Best, chief financial officer of GameStop.

"These results reflect the successful execution of our strategic priorities, including investing in new technologies and expanding our e-commerce business."

The company's stock price closed on Tuesday at $25.30. The stock is up more than 300% in the past year.

At 13:00 GMT, the shares were up 10% in the pre-market session at $27.89.

The company said it will discuss the results in more detail during a conference call at 16:00 ET (21:00 GMT).

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