GameStop's Gamble: Retailer's Debt-Fueled Bitcoin Bet Sparks Concern

GameStop Shares Slide After Announcing Debt Issue to Buy Bitcoin

GameStop (GME) - Get Report shares slid Wednesday after the video game retailer announced plans to issue debt to fund a $1 billion investment in bitcoin.

The company said it would use the debt to buy 504,956 bitcoins, which it valued at $100 million, or about $0.20 per coin. The investment is part of a broader effort to diversify its assets and generate returns outside of its core retail business.

However, investors were unimpressed, sending GameStop shares down 10% to $42.50 in morning trading.

"GameStop's decision to invest in bitcoin is a surprise, but it's not entirely unexpected given the company's history of taking unconventional bets," said Michael Pachter, an analyst at Wedbush Securities. "The question is whether this is a smart move or just a desperate attempt to generate returns."

GameStop's stock has been under pressure in recent months as the company struggles to adapt to a shift in consumer behavior towards digital gaming and online shopping.

The company's announcement comes as the price of bitcoin has surged to record highs, fueled by speculation and interest from institutional investors. GameStop's investment is a relatively small one, but it marks a significant shift for the company, which has traditionally focused on its retail business.

GameStop's CEO, George Sherman, said in a statement that the company believes bitcoin has "long-term potential" and that the investment is a way to "generate returns outside of our core retail business."

The company's debt offering will be used to fund the bitcoin investment, as well as other corporate purposes. GameStop said it expects to close the debt offering in the coming weeks.

GameStop's announcement sent shockwaves through the financial community, with many questioning the wisdom of the company's decision to invest in a highly volatile asset like bitcoin.

"This is a highly unusual move for a company like GameStop, which is not exactly known for its financial acumen," said Pachter. "I'm not sure what the endgame is here, but I'm sure we'll be talking about this for a while."