GameStop, the video game retailer known for its meme stock status, has announced plans to invest in Bitcoin, sending its stock soaring 12% higher. According to the company, it intends to raise $1.3 billion via the offering of convertible senior notes, part of which would go for Bitcoin purchases.
After the announcement, GameStop shares surged almost 12% on March 26 before closing. However, shares fell 8% after hours as investors considered the risks of investing in cryptocurrency.
The board of GameStop has updated its investment policy to recognize Bitcoin as a treasury reserve asset. The GameStop board officially recognizes Bitcoin as part of its investment policy, a big step in its financial journey. As of February 1, the retailer had cash reserves of 4.77 billion dollars, substantially higher than the 921.7 million dollars a year ago.
Many companies are adding digital assets like Bitcoin to their balance sheets as part of their strategy.
MicroStrategy and other companies gained a lot of stock after doing that. MicroStrategy’s stock has risen 3200% since they bought Bitcoin in 2020, raising hopes for something similar for GameStop.
Although people are excited, Wall Street experts are not so confident. Some analysts say frequent changes in strategies may confuse investors about GameStop. There is concern about the volatility of Bitcoin as it shifts between the prices of $76,000 and $109,000.
GameStop has reported its fourth-quarter earnings, showing a net income of $131.3 million—more than twice last year’s total. However, the business had a net sales decline of $511 million year over year, forcing the company to aggressively reduce expenses, including shuttering 590 stores throughout the U.S. in 2024. GameStop stock is likely to see considerable monitoring as the business attempts to get further into cryptocurrency. The future will tell if GameStop experiences the same success as other Bitcoin-investing companies or suffers from whiplash.
