GameStop Corp. plans to raise $1.3 billion through a convertible bond offering to buy Bitcoin. This strategy is inspired by Michael Saylor, a well-known crypto advocate.
The company’s board has approved adding Bitcoin to its treasury reserves, marking a significant change in its approach. The bond sale is intended for general corporate purposes, including the Bitcoin acquisition.
This move puts GameStop in line with other public companies that are using convertible debt to invest in digital assets. Michael Saylor’s company, MicroStrategy, was the first to adopt this method, accumulating over $40 billion in Bitcoin and seeing a significant rise in its stock value.
Convertible bonds allow investors to convert their bonds into company shares if the stock price reaches a certain level. GameStop is offering bonds that will mature in 2030, with a conversion premium of 35% to 40%. This premium is the rate at which bondholders can exchange their bonds for shares if the stock price increases.
GameStop’s offering has a lower premium compared to MicroStrategy’s previous bond issues. For example, MicroStrategy’s bond sale last November had a 55% premium, while a $2 billion issuance in February offered a 35% premium. These changes indicate that the market is becoming more cautious, and investors are looking for better deals.
After the announcement, GameStop’s stock dropped 6.6% in after-hours trading, erasing earlier gains. As of 5:30 p.m. in New York, shares were priced at $26.44. A GameStop spokesperson did not comment on the situation. The company’s move into Bitcoin comes at a challenging time, with falling crypto prices and uncertain economic conditions.
Currently, Bitcoin is trading significantly below its all-time high, down about 18%. Investor risk appetite has also decreased, with many pulling back from volatile assets. Despite these challenges, GameStop is moving forward, betting on Bitcoin’s long-term value. The success of this strategy will depend on the recovery of the crypto market and investor confidence in GameStop’s leadership.
