GameStop diversifies in the form of 4,710 BTC – Mart hedging or adventure game?
GameStop made headlines this week when it confirmed the big bitcoin purchase. The retailer bought 4,710 BTC for about $513 million. The money comes from cash raised in March through a $1.4 billion convertible notes sale. This is the first time Gamestop has placed cryptocurrencies on its balance sheet.
High-bet crypto purchase
According to a company statement, GameStop uses part of its debt to acquire Bitcoin. The $1.4 billion note sale is designed to provide the company with more options for video games and accessories. Now, almost a billion dollars are in cryptocurrency. It’s a bold move for chains that are still known for their physical stores and physical footprints.
Stock price fluctuations and investor responses
According to the report, talk about crypto-pushing will boost GameStop’s stock early this year. Rumors in February brought the stock to a rise of about 18%. Then, in March, when management first mentioned possible crypto plans, stocks rose by another 10%.
On May 27, the stock closed at $35. In the previous market transaction the next day, it was $36.30. GameStop shares have grown by about 28% over the past month. During the year, they grew by about 11%.
BTCUSD trading at $107,756 on the 24-hour chart: TradingView.com
Retail sales continue to decline
GameStop’s core business is not that lucky. Revenue in the latest quarter fell 25% compared to the same period last year. This kind of slide makes it difficult to prove overestimation.
The company is like a high-growth technology company in more than 100 times its revenue, rather than a retail chain with declining sales. Some investors are worried that Bitcoin games will spread the basics of the store business.
Debt burden attracts attention
Purchasing cryptocurrencies with debt adds another layer of risk. If the stock price reaches certain levels, the convertible notes can be turned into stocks. This will dilute existing shareholders. If Bitcoin dives, GameStop could face paper losses in its $513 million investment. At the same time, it still needs to manage its debt costs and keep the lights in the store.
GameStop’s bet on Bitcoin shows how far the company is willing to go to get rid of the faded retailer image. If cryptocurrencies continue to rally, the play may pay off. However, it can also backfire if Bitcoin or core business fails to recover. Either way, Crypto fans and long-term GameStop customers will keep an eye on the move.
Featured images from Gamerant, charts from TradingView
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