GameStop’s decision to invest in bitcoin has sparked renewed interest in the company, leading to an 11.6% surge in its shares to $28.36. The move comes as GameStop’s core brick-and-mortar business faces challenges in attracting customers, but its crypto pivot has brought retail investors back to the stock, once a meme stock favorite.
GameStop’s Bitcoin Investment Strategy
GameStop revealed its new investment strategy on Tuesday, declaring that it would hoard bitcoin as part of its treasury reserve assets. This aligns with the strategy of other companies, such as exchange operator Strategy, which holds a substantial amount of bitcoin. The announcement coincided with increased attention on digital assets, particularly cryptocurrencies, fueled by U.S. President Donald Trump’s focus on the sector.
Despite the positive reaction from retail investors, GameStop’s announcement of a $1.3 billion offering of five-year convertible notes to fund the bitcoin purchase led to a 5.5% drop in its stock during after-hours trading.
Analysts Weigh in on Bitcoin’s Impact
Analysts are skeptical about the long-term impact of the bitcoin investment on GameStop’s share price. Wedbush’s Michael Pachter argued that while the move appeals to retail investors who want GameStop to invest in cryptocurrencies, it is unlikely to drive a substantial increase in the company’s stock value. He pointed out that while companies like Strategy have seen their stock value closely align with their bitcoin holdings, GameStop trades at a higher multiple relative to its cash reserves, which raises questions about the sustainability of this approach.
Despite the volatility of bitcoin, which has seen its price fall from a six-figure high earlier this year, GameStop’s decision to invest in digital assets could lead to increased market fluctuations, according to analysts like Daniela Hathorn from Capital.com.
The Bigger Picture
GameStop’s recent moves, including aggressive cost-cutting measures and store closures, helped the company more than double its net income in the last quarter, although sales dropped by about 30%. These efforts have provided some financial stability for the company, but it remains to be seen whether its pivot to digital currencies will provide sustained growth.
