GameStop Invests Corporate Cash in Bitcoin, Confirming Earlier Reports

The announcement confirmed earlier reports from February suggesting the company was exploring cryptocurrency investments.

GameStop announced that its board of directors has approved a plan to invest some of the company's cash in Bitcoin.

The company disclosed in a filing with the Securities and Exchange Commission that it "may purchase units of Bitcoin and U.S. dollar-denominated stablecoins to serve as Treasury Reserve Assets." It added that it "has not set a maximum amount of Bitcoin that we may accumulate and may sell any Bitcoin that we may acquire."

GameStop also acknowledged the risks involved, stating that "Bitcoin is a highly volatile asset and has experienced significant price fluctuations over time."

The investment policy update was approved unanimously by GameStop's board on March 18. The company also shared the news on social media.

The video game retailer's stock responded accordingly. After closing down 0.82% at $25.40 on Tuesday, GME shares rose more than 12% in pre-market trading on Wednesday.

The move marks a new chapter in GameStop's transformation since Ryan Cohen, the founder of online pet supplies retailer Chewy, took the helm of the struggling brick-and-mortar video game retailer.

Since arriving in 2022, Cohen has focused on cutting costs and streamlining operations to improve profitability. He has also been exploring new revenue streams and growth opportunities to diversify the company's earnings potential.

This latest development follows earlier reports in February suggesting that GameStop was exploring cryptocurrency investments.

The company's substantial cash reserves, which totaled nearly $4.8 billion as of February 1, provide the financial flexibility to pursue this new venture while continuing to manage its core retail business.

For the fourth quarter, GameStop reported net income of $131.3 million, more than double the $63.1 million earned during the same period last year. For the full 2024 fiscal year, the company disclosed profits of $131 million on sales of $3.8 billion, primarily from selling video game hardware and accessories. This compares to a profit of $6.7 million on sales of $5.3 billion in the previous year.

However, GameStop's net sales for Q4 reached $1.28 billion, marking a 28% decline from the year-earlier period. Additionally, the company's full-year adjusted EBITDA was $36.1 million, down from $64.7 million in the previous year.

Some Wall Street analysts remain skeptical about GameStop's Bitcoin strategy.

"I think they're trying to pivot the business in response to the fact that their core video game business continues to decline rapidly, and I think they're getting frustrated by that fact," said Wedbush analyst Michael Pachter.

"The problem with that thinking is MicroStrategy trades at about two times their bitcoin holdings. If GameStop were to buy all bitcoin with their $4.6 billion in cash and trade at two times [their bitcoin holdings,] the stock would drop five bucks."