GameStop's Bitcoin Bet Backfires as Debt Sale Sparks Concerns

GameStop Slumps as Plan to Sell Debt to Fund Bitcoin Purchases Sparks Concern

GameStop (GME) shares plummeted more than 10% on Tuesday after the struggling retailer announced plans to sell debt to fund its purchases of bitcoin.

The move comes as GameStop, which has been struggling to compete with online retailers like Amazon, seeks to diversify its investments and potentially generate returns. The company has been buying up bitcoin, the digital currency, in recent months, and is now looking to raise capital to fund these purchases.

However, the plan has raised concerns among investors and analysts, who worry that the company is taking on too much debt and diverting funds from its core business. GameStop's shares have been under pressure in recent months, and the announcement sent the stock tumbling to a new 52-week low.

"We're concerned that GameStop is prioritizing its bitcoin purchases over its core business," said Michael James, a portfolio manager at James Investment Research. "The company needs to focus on turning around its retail business, not taking on debt to fund its speculative investments."

GameStop's CEO, George Sherman, defended the move, saying that the company is simply diversifying its investments and exploring new opportunities. "We're not abandoning our core business," Sherman said. "We're just recognizing that there are other opportunities out there that can generate returns for our shareholders."

The move has sparked concerns among investors and analysts, who are worried about the potential risks associated with GameStop's foray into the world of cryptocurrencies. Bitcoin prices have been volatile in recent months, and some analysts are warning that the company may be taking on too much risk.

"We're not convinced that this is a good use of capital for GameStop," said Mark Mahaney, an analyst at RBC Capital Markets. "The company should be focusing on turning around its retail business, not taking on debt to fund its speculative investments."

GameStop's shares were down 10.5% in afternoon trading, as investors digested the news. The company's stock has been under pressure in recent months, and the announcement sent the stock tumbling to a new 52-week low.