GameStop shares tank on convertible bond offering to potentially buy more bitcoin
GameStop is following in the footsteps of software company MicroStrategy, now known as Strategy, which bought billions of dollars worth of bitcoin in recent years to become the largest corporate holder of the flagship cryptocurrency. That decision prompted a rapid, albeit volatile, rise for Strategy's stock.
Strategy has issued various forms of securities including convertible debt to fund its bitcoin purchases.
CEO Ryan Cohen recently said GameStop's decision to buy bitcoin is driven by macro concerns as the digital coin, with its fixed supply and decentralized nature, could serve as protection against certain risks.
The brick-and-mortar retailer reported a decline in fiscal first-quarter revenue on Tuesday as demand for online gaming rose. Its revenue dropped 17% year over year to $732.4 million.
The shares fell 5% on Wednesday after those results. Wall Street appears uncertain it can mimic the success of MicroStrategy.
Wedbush analyst Michael Pachter reiterated his underperform rating on GameStop on Wednesday, saying the meme stock has consistently capitalized on "greater fools" willing to pay more than twice its asset value for its shares. The Wedbush analyst believes the bitcoin buying strategy makes little sense as the company, already trading at 2.4 times cash, isn't likely to drive an even greater premium by converting more cash to crypto.
Correction: GameStop shares fell 5% on Wednesday. An earlier version misstated the percentage.
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