[NEW YORK] GameStop is seeking to sell US$1.3 billion of convertible bonds with no coupon payment to fund Bitcoin purchases as it embraces a strategy that was developed by the cryptocurrency advocate Michael Saylor.
The video-game retailer had rallied after the company said on Tuesday (Mar 25) that its board approved a plan to add Bitcoin as a treasury reserve asset. That was followed on Wednesday with a filing announcing the planned sale of the bonds, which will be used for general purposes, including the acquisition of Bitcoin.
The Grapevine, Texas-based GameStop is marketing the notes with a 35 to 40 per cent conversion premium, according to sources familiar with the deal who asked not to be identified because the information is private. The convertible notes are due in 2030 and proceeds will be used in part to buy Bitcoin, the Wednesday filing said.
The company joins a growing list of public companies experimenting with taking on convertible debt to buy the digital asset in a bid to capitalise on upswings in Bitcoin. The tactic was pioneered by Saylor’s Strategy, the enterprise software company formally known as MicroStrategy, which has acquired more than US$40 billion in Bitcoin and seen its share price soar.
GameStop’s entry into the market comes even as investors appear to be growing more sceptical of the strategy. The 35 to 40 per cent premium that GameStop is looking to offer on its bonds is less than the roughly 55 per cent premium on a similar issue from Strategy in November, when markets were more receptive to these securities.
More recently, Strategy made a US$2 billion sale in February that had a 35 per cent premium. That along with the terms in a growing slate of debt-like instruments offered by Strategy, suggest that investors are demanding better terms.
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GameStop fell after the filing was released, erasing some of the gains from earlier in the day, and shares were down 6.6 per cent to US$26.44 as at 5.30 pm New York time in after-market trading on Wednesday.
A spokesperson for GameStop did not immediately respond to a request for comment.
GameStop’s push to quickly ramp up its Bitcoin purchases comes against a starkly different backdrop than when Strategy and other copycats flooded the market at the end of 2024. The cryptocurrency is down roughly 18 per cent from an all-time high in January, and investors are bailing on a variety of risky assets amid tariff uncertainty and choppy economic data.
The tactic is appealing for GameStop as it looks to diversify away from an underlying business that’s been experiencing declining sales. The retailer reported late Tuesday that fourth-quarter revenue declined 28 per cent to US$1.28 billion from the year-ago period. Sales of hardware and accessories and of software both declined in the quarter, while collectible sales rose.
A variety of companies, ranging from medical tech providers to hotel developers, have been inspired by the rise of Strategy. Its stock has increased by over 2,600 per cent since co-founder Saylor began investing the company’s cash into Bitcoin as a hedge against inflation in 2020. The cryptocurrency is up close to 700 per cent over the same period.
Many companies have used corporate cash to purchase digital tokens. But a growing number have also taken the riskier route of taking on debt to fund the strategy. Convertible bonds can be more attractive for companies than share sales because the bonds do not immediately dilute stockholders. The instruments have been popular with hedge funds because the securities make it possible to pursue a kind of arbitrage that capitalises on the volatility of the underlying stock.
GameStop could be particularly attractive to this crowd because of the volatility it has experienced since becoming a meme stock, and a favourite of retail traders back in 2021. BLOOMBERG
