- GameStop has taken Bitcoin into its treasury reserves, leading to an after-hours trade stock price surge of more than 6%.
- The move follows after CEO Ryan Cohen’s exchange with MicroStrategy’s Michael Saylor, who is known for making large Bitcoin investments.
- Analysts are still split, with fears of GameStop’s changing business model and the dangers of Bitcoin’s volatility.
GameStop has taken a large step by opting to invest in Bitcoin. The board of the company has sanctioned a revision to its investment policy, adding Bitcoin to the list of treasury reserve assets. This comes following rumors in the last month that GameStop was considering investing in cryptocurrencies.
The news directly affected the price of the stocks, with shares rising more than 6% in after-hours trading on Tuesday.
GameStop’s Bitcoin Bet and Market Reaction
GameStop’s Bitcoin interest took center stage when CEO Ryan Cohen shared a photo with MicroStrategy cofounder Michael Saylor. Saylor’s firm is known to have bought into Bitcoin in a big way, sitting on over 447,000 tokens.
Some viewed Cohen’s message as an indicator that it was following the same strategy. The newest development is here, with the firm formally venturing into the cryptomarket.
But not everyone believes this will be a good thing for the company in the long term. Wall Street analysts are divided, with some noting that their business model has shifted multiple times over the past few years.
Wedbush analyst Michael Pachter pointed out that MicroStrategy is valued at roughly double its Bitcoin holdings, but it may not experience the same type of surge.
If GameStop were to put all of its cash reserves into Bitcoin, Pachter estimates the stock value could even decline.
Funding Bitcoin Investment Through Convertible Notes
To use to buy Bitcoin, GameStop will raise $1.3 billion in convertible senior notes. The disclosure arrived a day after GameStop’s stock rose almost 12% after the first news of Bitcoin. The stock declined more than 8% after hours on Wednesday after the fundraising strategy was disclosed.
GameStop also announced its fourth-quarter earnings, indicating a year-over-year net sales decline of 28%. It recorded revenues of $1.28 billion during the quarter. But its adjusted net income rose to $136.4 million, from $67.7 million the previous year. This was managed while reducing costs despite its revenue decline.
The investment in Bitcoin is made at a time when the price of the cryptocurrency is close to record levels, trading at just below $88,000. Although Bitcoin has been doing well in recent times, it is still a volatile asset.
Whether GameStop’s move will be beneficial to the company in the long term is yet to be determined. The stock market’s response for now has been lukewarm, with both enthusiasm and distrust over the video game retailer’s move into cryptocurrency.
Also read : Latest Purchase of Metaplanet boosts their holdings to 3350 BTC
