- GameStop stock dropped over 25% after announcing plans to raise $1.3B in debt to buy Bitcoin.
- The move mirrors MicroStrategy’s crypto strategy but drew skepticism due to GameStop’s high valuation.
- Analysts warn the stock could fall further as the company prepares to issue zero-coupon convertible notes.
Well, that didn’t go over well.
GameStop stock took a nosedive Thursday—dropping more than 25%—after the company said it plans to raise $1.3 billion through convertible debt… to buy Bitcoin. Yes, really. This comes just one day after the stock jumped nearly 12%, so yeah, it’s been a wild week for the meme crowd.
From Meme Rally to Freefall
On Tuesday, the board gave a unanimous thumbs-up to a plan that lets GameStop scoop up crypto using either company cash or whatever money it raises through new debt or equity. Basically, it’s following the same “put Bitcoin on the balance sheet” playbook that MicroStrategy made (in)famous.
But the market? Not loving it.
This latest move involves selling a bunch of convertible senior notes, due in 2030. It could end up adding 46 million new shares to the float—yeah, that’s… a lot. If all goes through, the company’s cash would rise to about $6.1 billion (up from $4.8B), according to Wedbush analyst Michael Pachter.
Analysts: Not Exactly Bullish
Pachter, by the way, isn’t buying the hype. He’s got an underperform rating on the stock and made it clear in a note to clients that he sees more downside coming.
“We suspect that GameStop’s share price will drift lower prior to the issuance of the convert,” he said, pointing out that the notes are zero-coupon (aka no interest), and whoever buys them is basically betting the whole “GameStop meme magic” keeps going strong for five more years.
That’s a big ask.
Can GameStop Pull a MicroStrategy? Maybe Not.
The whole thing feels like déjà vu. But analysts are quick to say that GameStop isn’t in the same lane as MicroStrategy—at least not financially. The stock is already trading at over 2x its cash balance, while MicroStrategy trades below 2x the value of its Bitcoin stash. So unless Bitcoin really takes off, this move might not add much value.
“With GameStop already trading at more than 2x its cash holdings,” Pachter said, “it is unlikely that its conversion of cash into Bitcoin will drive an even greater premium.”
Translation: Don’t hold your breath for another moonshot.
