Author: Fairy, ChainCatcher

Editor: TB, ChainCatcher

Yesterday, GameStop officially announced that it will include Bitcoin in its corporate reserve assets, becoming the latest publicly traded company to venture into cryptocurrency. This veteran game retailer is trying to emulate the successful experience of Strategy, seeking breakthroughs amid sluggish growth in its traditional business.

From "King of Retail Investors" to "Crypto Believer," can GameStop's transformation bring new life?

GameStop's Transformation Dilemma

In Q4 2024, although GameStop's net income increased, its net sales decreased by $511 million year-on-year, and it closed 590 stores in the U.S. within a year. Wedbush analyst Michael Pachter once rated GameStop as "underperforming" and set a target price of $10, holding a pessimistic view on its prospects.

The root of GameStop's problems lies in the fact that its core business is gradually being phased out by the market. As a traditional retailer relying on physical stores to sell game hardware, software, and peripherals, it has been ruthlessly marginalized by the rise of digital game downloads and e-commerce platforms. Faced with declining sales and shrinking stores, GameStop has been forced to embark on a radical and uncertain transformation path.

In recent years, GameStop has continuously attempted to reshape itself: from promoting e-commerce, adjusting investment strategies, to entering the NFT space by launching an NFT marketplace and digital asset wallet. Pachter bluntly stated, "GameStop's strategy has been adjusted about six times in the past three years," as the company has been searching for a new direction for survival.

Now, GameStop is betting on Bitcoin, trying to carve out a new growth path. This new gamble may determine its ultimate fate.

****Imitating Strategy, **$1.3 Billion Bond Bet on Bitcoin

GameStop is borrowing a classic strategy from Strategy—financing the purchase of Bitcoin through the issuance of convertible bonds.

The company plans to privately issue a total of $1.3 billion in 0.00% convertible senior notes, which will mature in 2030. To further attract investment, GameStop is also granting initial purchasers a 13-day option to purchase up to an additional $200 million in notes.

These notes are classified as GameStop's general unsecured debt, will not accrue regular interest, and the principal will not accumulate. Investors can choose to convert the notes into cash, GameStop Class A common stock, or a combination of both before maturity, with the specific conversion form determined by GameStop.

In related documents, GameStop clearly stated that its investment policy allows for investments in certain cryptocurrency assets, including Bitcoin and USD stablecoins. Furthermore, GameStop revealed that the company may invest some of the funds raised from cash, debt, or equity financing into Bitcoin in the future, with no upper limit set on Bitcoin holdings, and it may also sell its Bitcoin holdings.

As of February 1, GameStop's cash reserves stood at $4.77 billion, indicating that the company has sufficient financial space to make this strategic investment. This "Meme Stock + Cryptocurrency" cross-industry experiment is beginning to unfold.

Positive for the Crypto Market, but Not Necessarily for GameStop?

After the announcement, GameStop's stock price rose by 11.65% during trading hours, but fell by 7.40% in after-hours trading compared to the closing price. While this move injected new vitality into the crypto market, investors have mixed feelings about the prospects of GameStop's transformation.

Strategy's stock price has risen by 84% over the past year, and since it began purchasing Bitcoin in 2020, its stock price has increased 23-fold. However, whether this success can be replicated in GameStop remains uncertain.

Wedbush analyst Michael Pachter stated, "The problem is that Strategy's current trading price is about twice the value of its Bitcoin holdings. If GameStop were to use its $4.6 billion in cash to buy Bitcoin entirely and trade at twice the valuation of its Bitcoin holdings, its stock price could actually drop by $5."

Market observers' criticisms are more straightforward:

Community member @KabraxFX stated, "****This means that **GME cannot find an effective way to utilize its massive cash reserves to develop its business. In my opinion, this is bearish."

Investor @MonkEchevarria commented, "GameStop's move is indeed interesting, but Bitcoin cannot compensate for its weak fundamentals. While exceeding earnings expectations is good, it does not change the reality of its sluggish growth and weak cash flow. Price does not equal value, and speculation does not equal strategy. From a perspective of more than three years, this looks more like a desperate pivot rather than a true transformation."

Some even joked that GameStop is now a hedge fund.

GameStop's story continues to unfold amid disruption and controversy. Bitcoin may add a splash of color to GameStop's balance sheet, but it may not necessarily resolve its business dilemmas.

In this ever-changing narrative, the only certainty is the uncertainty itself.

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