GameStop Embraces Bitcoin as a Treasury Reserve Asset, Sending Shares Soaring

The video game retailer that became synonymous with the ‘meme stock’ phenomenon in 2021 is making a significant investment in the future of cryptocurrency.

GameStop, the video game retailer that became a mainstay of the ‘meme stock’ phenomenon in 2021, is planning to invest in Bitcoin and will hold the cryptocurrency as a treasury reserve asset, the company said in a regulatory filing on Thursday.

The company’s move to purchase Bitcoin comes as it reported a fourth-quarter loss and a 22% drop in revenue.

GameStop's shares price nearly tripled in after-hours trading.

Adopting MicroStrategy’s Bitcoin Playbook: A New Era for GameStop?

GameStop appears to be following Strategy’s approach in accumulating Bitcoin. This business intelligence firm has famously reinvented itself as a corporate Bitcoin accumulator. While Strategy has built its corporate identity around Bitcoin, GameStop’s adoption of the digital asset represents a more experimental move, given its history as a retailer rather than a technology-driven firm. Now, GameStop is using a playbook of its own, hoping to capitalize on the potential of cryptocurrency.

GameStop is expected to use cash on hand or an unspecified mix of new debt and equity issuances to purchase Bitcoin, according to multiple reports. The extent of GameStop’s capital commitment to Bitcoin remains unclear, but the company appears committed to this strategy. In its earlier filing from February, the company disclosed that it had about $4.8 billion in cash.

However, skepticism lingers, with some analysts hinting that GameStop’s strategy might be some kind of long-awaited gambit, although its precise implications remain unclear.

Cost-Cutting and Profitability: A Broader Strategy

GameStop’s Bitcoin investment is part of a broader strategy led by CEO Ryan Cohen. Cohen became a member of GameStop’s board in 2021. He aims to transform the company into a leaner, more profitable business that is less reliant on traditional brick-and-mortar stores. In 2024, GameStop shuttered 590 stores in the United States and expects to close even more in 2025. The measures were taken to cut costs.

That strategic shift comes amid improving financial performance. GameStop had a net income of $131.3 million in the fourth quarter, more than doubling the $63.1 million it reported in the same period a year ago. That was fueled by cost-cutting and higher sales for video game hardware and merchandise. But quarterly revenue was $1.28 billion, down from $1.79 billion a year earlier.

Challenges with GameStop’s Bitcoin Investment: Spotting the Risk and Volatility

While the potential rewards can be immense, GameStop recognizes the risks behind investing in Bitcoin. The company acknowledged the volatility surrounding cryptocurrency prices. GameStop said in its SEC filing that its strategy “has not been tested and may prove unsuccessful“.

In December, Microsoft’s shareholders rejected a proposal related to cryptocurrency adoption, highlighting the uncertainties surrounding corporate investment in digital assets.

Key Players in the GameStop Strategy

Ryan Cohen, the co-founder of pet e-commerce site Chewy, purchased a stake in GameStop in 2020. It was just before the company became the poster child of the meme stock trading craze.

Investors flocked into the stock, believing Cohen’s online retail expertise could modernize the company. GameStop announced crypto wallets for managing cryptocurrencies and NFTs in 2022. That service was discontinued in 2023, with the company saying “regulatory uncertainty” had led to the decision.

In December 2023, GameStop’s board approved a new investment framework. That policy gives Ryan and two independent directors the authority to oversee the company’s investment portfolio. All investing must be conducted under the guidelines set forth in that policy, unless the committee votes unanimously or the full board approves by majority vote.

Future for GameStop: Implications of the Bitcoin Investment

For GameStop, embracing Bitcoin is a move that could change the company for the better. Whether this gamble will pay off remains to be seen. It could reinvigorate its business and usher in a new era of growth, or it could expose the company to greater risk and instability. It is a bet that has certainly piqued the interest of the financial world.