GameStop (NYSE: GME) Unveils Plans for a Significant $1.3 Billion Private Offering of Convertible Senior Notes

Just a day after announcing its foray into Bitcoin as a treasury reserve asset, GameStop Corp. (NYSE: GME) has unveiled plans for a significant $1.3 billion private offering of convertible senior notes.

GameStop Corp. (NYSE:GME) is planning to raise $1.3 billion via a private offering of convertible senior notes, the video game retailer announced on Wednesday.

This comes a day after GameStop announced its inclusion of Bitcoin in its treasury reserve assets.

The company intends to use the net proceeds “for general corporate purposes, including the acquisition of Bitcoin in a manner consistent with GameStop’s Investment Policy,” it said in a statement.

GameStop will also grant the initial purchasers an option to buy up to an additional $200 million in notes. These notes will be general unsecured obligations of GameStop, will not bear regular interest, and will mature on April 1, 2030, unless converted, redeemed, or repurchased earlier. Upon conversion, GameStop will have the option to pay or deliver cash, shares of its Class A common stock, or a combination thereof.

The announcement of this debt offering comes closely after GameStop announced on Tuesday that its board had approved an update to its investment policy to include Bitcoin and U.S. dollar-denominated stablecoins as treasury reserve assets. The news sent GameStop shares up 16% on Wednesday, as investors reacted to the company’s move.

However, the enthusiasm was dampened somewhat by the subsequent announcement of the $1.3 billion debt offering. In after-market trading on Wednesday, GameStop shares dropped by 8%, erasing a significant portion of the day’s earlier gains. Investors appear to be considering the implications of holding Bitcoin on the balance sheet versus taking on a substantial amount of debt.

Convertible senior notes are debt securities that can be converted into equity (in this case, GameStop’s Class A common stock) at a later date, typically at the holder’s option. This type of financing has been notably employed by Strategy (formerly MicroStrategy), which has amassed a Bitcoin treasury valued at over $40 billion and has seen a strong correlation between its stock price and the price of Bitcoin.

GameStop’s move to raise a substantial sum through convertible debt to purchase Bitcoin closely follows Strategy’s approach. GameStop reported having $4.8 billion in cash during its fourth-quarter earnings on Tuesday, and this debt offering will significantly increase its financial resources for its new investment strategy.

GameStop stock closed at $28.36 on Wednesday, down 9.5% year to date.