GameStop's $1.3 Billion Convertible Notes Spark Investor Debate

GameStop Corp., the video game retailer known for its association with the "meme stock" phenomenon, has announced a private offering of $1.3 billion in convertible senior notes due in 2030. The company intends to use the proceeds to purchase Bitcoin, signaling a significant shift in its financial strategy.

The zero-coupon notes will mature on April 1, 2030, unless converted, redeemed, or repurchased earlier. They will initially convert at a rate of 33.4970 shares per $1,000 principal amount, equating to an initial conversion price of approximately $29.85 per share. This represents a 35% premium over GameStop's closing price of $22.09 on Thursday.

Following the announcement, GameStop's shares experienced a sharp decline, dropping 22.1% on Thursday. This downturn reflects investor skepticism regarding the company's move into cryptocurrency investments. Analysts have raised concerns about the rationale behind paying a premium for potential Bitcoin conversion, especially when investors have direct avenues to invest in Bitcoin or related exchange-traded funds.

Despite these reservations, some analysts acknowledge GameStop's recent operational improvements. The company reported an operating profit in the fourth quarter of 2024, bolstering confidence in its ability to achieve breakeven results in the near future.