GameStop Tumbles 25% Following Bitcoin Convertible Bond Plan. What’s Happening?

“GameStop’s Bitcoin Bet Goes Bust: What Happens Next?”

What to know:

Well, it looks like GameStop’s bitcoin bet has gone bust. 🤦‍♂️ Shares of the embattled video game retailer plunged 25% on Thursday, more than erasing all the gains since the company earlier this week announced it will add bitcoin (BTC) as a treasury reserve asset.

GME fell to just above $21 during the session, trading at its lowest price since October and down over 28% from its Wednesday peak of nearly $30. It’s like they say: “Pride comes before a fall”… or in this case, a 25% plummet. 😱

The price action happened after the company unveiled plans late Wednesday for a $1.3 billion, 0% convertible note offering to raise money for its BTC acquisition plan. After an initial wave of euphoria among the crypto crowd, the hype died down on Thursday after investors took a closer look at the financing. It’s like they say: “Don’t count your chickens before they hatch”… or in this case, don’t bet the farm on a dodgy convertible note. 🤑

“Many existing shareholders dislike the move, so a switch is happening with large volume,” Louis Liu, chief investment officer of Mimesis Capital, said in an X post. Yeah, no kidding! When the people who own the company don’t like the plan, it’s probably a bad idea. 🤔

The sharp sell-off may also have to do with the convertible bond pricing period, as prospective bond buyers might be selling or shorting the stock. James Van Straten, senior analyst at CoinDesk, noted that MicroStrategy (MSTR) and Semler Scientific (SMLR) shares also declined during pricing periods of their convertible note offerings. It’s like they say: “When in doubt, sell… or in this case, short.” 🤑

“We suspect that GameStop’s share price will drift lower prior to the issuance of the convert, particularly given that a convert investor will receive a zero coupon and will be required to have faith that the GameStop meme phenomenon will persist for another five years,” said Wedbush analyst Michael Pachter, who has an underperform rating on GME. Yeah, good luck with that! 🤣

Pachter argued that the company is following Strategy’s playbook, but MSTR trades at less than twice the value of its bitcoin, while GME trades at more than twice its cash holdings. It’s like they say: “Don’t put all your eggs in one basket”… or in this case, don’t bet the farm on a dodgy bitcoin plan. 🤑

“We expect the offering to fall flat,” Pachter continued. “We find it hard to understand why any investor would pay more than 2x cash value for the potential for GameStop to convert that cash into BTC, particularly since the same investors can invest in BTC or a BTC ETF themselves.” Yeah, that’s what we thought. 🤔

GME is only the latest Wall Street firm to convert some of its cash into bitcoin. The trend started with Strategy, the company led by bitcoin proponent Michael Saylor, which years ago announced it would use its cash reserves to buy the cryptocurrency. MSTR’s success following the transition caused many other companies to follow, especially recently as U.S. President Donald Trump has promised to make the U.S. the center for digital asset development. Yeah, because that’s exactly what we need: more companies betting the farm on bitcoin. 🤑

While Saylor has long vouched for more companies, especially those with large cash reserves, and even the U.S. as a country, to adopt bitcoin as a reserve strategy, not everybody agrees. “Gambling on companies buying Bitcoin is not a good investment strategy,” said well-known bitcoin gadfly Peter Schiff in a post on X. “$GME has lost all of yesterday’s Bitcoin-inspired 15% gain. Shares are now down 2% over the two days combined. Now that all the fools have already rushed in, smarter investors are selling as they realize that wasting cash buying Bitcoin is not a viable long-term business model.” Yeah, tell us something we didn’t know. 🤣

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2025-03-27 21:54