GameStop Corp. (NYSE: GME) Announces Bitcoin Purchase Plans, Sparking Stock Rally

In a surprising yet bold move, GameStop Corp. (NYSE: GME) has announced plans to purchase Bitcoin as a treasury asset, sparking a significant stock rally.

GameStop Corp (NYSE:GME) announced plans to purchase Bitcoin as a treasury asset and issue 0.00% Convertible Senior Notes for $1.3 billion to qualified institutional buyers. The company will use the net proceeds for general corporate purposes, including the acquisition of Bitcoin.

What Happened: GameStop disclosed its intention to sell the 0.00% Convertible Senior Notes for $1.3 billion aggregate principal amount to buyers in a private placement offering. The company's role in the offering will be limited to the initial sale of the notes. Commencing full on the fifth business day of February 2024, the notes will be sold to buyers in a private placement offering.

The notes will be convertible into newly issued common stock of GameStop, with an original issue price per share of $21, or into a combination of such stock and cash. They will be sold to buyers in a private placement offering.

The notes will be sold to buyers in a private placement offering. The company plans to use the net proceeds from the offering for general corporate purposes, which may include the acquisition of Bitcoin.

Why It's Important: GameStop's move to buy Bitcoin follows a similar strategy employed by MicroStrategy (NASDAQ:MSTR).

Earlier this year, GameStop CEO Ryan Cohen met with MicroStrategy CEO Michael Saylor to discuss his company's Bitcoin strategy.

Saylor's company has adopted Bitcoin as its primary treasury reserve, funding massive acquisitions of the cryptocurrency with billions of dollars.

Under Saylor's leadership, MicroStrategy's stock price has surged despite its core software business struggling. Saylor's aggressive Bitcoin strategy has helped the company's stock price gain more than 1,000% since the start of 2020.

Bank of America analysts have noted that MicroStrategy's stock price movements are closely tied to Bitcoin's price fluctuations.

GameStop stock rose by 10% on Wednesday, reaching $21.10 in extended trading. The company's stock price has nearly tripled since the start of the year.

The company is expected to report its fourth-quarter earnings on March 7.

Last week, a report from the hedge fund GlassTower claimed that GameStop sold a portion of its preferred stock holdings in December to raise funds for Bitcoin purchases. The report also mentioned that the company's total net sales for Q4 2024 are expected to be around $1.1 billion, while its planned debt issuance of $1.3 billion will exceed that amount.

Investor Sentiment: One investor expressed their optimism, stating, "I'm not surprised at all. This is an excellent move by GameStop, and I'm thrilled for them. They have a fantastic balance sheet and generate substantial cash flow. I'm eagerly awaiting the company's earnings report."

Another investor added, "This is a high-risk, high-reward play for long-term investors. If Bitcoin prices continue to rise, we could see massive gains in GameStop's stock price. However, if there's a crypto market downturn and the company struggles to balance its retail business, the risk could be significant."

As GameStop executes its Bitcoin plan, investors will be closely monitoring how the company manages the volatile crypto market while juggling its retail operations.