GameStop’s shares crashed 22.1% Thursday, their steepest dive since June, after the retailer revealed plans to issue $1.3 billion in debt to buy bitcoin, reversing a 12% surge the prior day.
Traders reacted harshly to the announcement that the company would raise funds via convertible senior notes due in 2030. The move, intended to bolster bitcoin holdings, raised eyebrows as it means issuing 46 million extra shares, swelling GameStop’s cash reserves to $6.1 billion from $4.8 billion.
According to Wedbush analyst Michael Pachter investors face a “zero coupon” scenario requiring faith the meme stock’s boom will endure another five years before debt conversion. He applied an underperform rating.
Pachter also criticized GameStop’s bid to mirror MicroStrategy’s crypto play. Unlike MicroStrategy’s stock—priced below two times its bitcoin reserves—GameStop now trades at over double its cash holdings, leaving little room for Bitcoin’s valuation impact. “Converting cash to Bitcoin won’t drive a greater premium,” he said.
Pachter adds: “The meme phenomenon’s five-year lifespan is uncertain. Bitcoin’s returns, by contrast, depend on uncertain market conditions.”
GameStop’s current valuation exceeds $12.7 billion, more than twice its post-conversion cash balance. MicroStrategy, with stakes worth $8.0 billion, faces far less pressure on its price-to-asset ratio.
