It looks like GameStop is ready for its first Bitcoin purchase. The video game retailer , best known for the meme stock phenomenon, announced Tuesday the successful completion of a $1.5 billion private offering of convertible senior notes.
The firm plans to use a portion of the proceeds for the acquisition of Bitcoin.
GameStop Goes Crypto!
According to a new SEC filing, the offering, completed on April 1, saw strong demand, which allowed GameStop to fully exercise the initial purchaser’s option to sell an additional $200 million in notes beyond the initially planned $1.3 billion.
The notes, which will mature on April 1, 2030, are unsecured obligations of the company and carry a 0.00% interest rate. This means that investors will not receive regular interest payments.
It recalls Strategy’s Bitcoin playbook. Michael Saylor’s firm often leverages zero-interest convertible notes to raise capital without immediate dilution, offering investors potential upside through stock conversions.
The structure of the convertible notes allows holders the option to convert their debt into GameStop’s Class A common stock under certain conditions.
Before January 1, 2030, the conversion is contingent on factors such as GameStop’s stock price reaching at least 130% of the conversion price, or if the trading price of the notes falls dramatically.
After January 1, 2030, holders can convert the notes at any time before maturity, regardless of these conditions. Upon conversion, GameStop retains the flexibility to settle its obligation in cash, shares, or a combination of both.
The initial conversion rate is set at 33.4970 shares of GameStop stock per $1,000 principal amount of notes, translating to an initial conversion price of approximately $29.85 per share.
Debt For Bitcoin
While GameStop cannot redeem the notes before April 6, 2028, it has the option to do so thereafter if its stock price meets a certain threshold. Conversely, noteholders have the right to demand GameStop repurchase their notes on April 3, 2028, and also in the event of a fundamental change in the company.
GameStop proposed the private offering on March 26 after confirming its plans to invest in Bitcoin. The company also disclosed holding $4.75 billion in cash, cash equivalents, and marketable securities as of February 1.
The meme stock icon first showed its intention to invest in Bitcoin in February, CNBC reported. At the time, it was said to also mull over other cryptocurrencies to see whether it made sense to put one or some of them on its balance sheet.
GameStop CEO Ryan Cohen also met with Strategy’s Saylor in early February. There were never details about what they talked about but all the things about Bitcoin investment and note offerings surfaced after that meeting.
Saylor and Strategy have inspired multiple firms, both large and small, American and global, to enter the Bitcoin reserve race. Some remarkable examples are Rumble, a video-sharing platform and cloud services provider, and Metaplanet, a Tokyo-listed company often referred to as “Asia’s Strategy.”
In November 2024, Rumble announced its plan to allocate up to $20 million of its cash reserves to Bitcoin. The decision came after CEO Chris Pavlovski’s poll that resulted in 93.9% of respondents voting in favor of the move.
The company then made its first Bitcoin purchase in March, scooping approximately 188 Bitcoin at an average price of $91,000 per coin, totaling $17.1 million.
GameStop Stock Drops Post-Bitcoin News
GameStop (GME) shares surged after its first Bitcoin announcement, but plummeted over 20% shortly thereafter.
Factors behind the decline could vary, but many experts suggest that investors could be uncertain about how GameStop’s pivot to Bitcoin makes sense for its struggling retail business.
The company has closed over 1,000 stores over the past year due to the shift towards digital gaming and increased competition from online retailers. The company has struggled to adapt its brick-and-mortar model to these changes.
Initial excitement among retail investors, who often follow GameStop as a “meme stock,” quickly gave way to skepticism. Investors are concerned about whether this move will help stabilize or grow the company’s core business.