Written by: Fairy, ChainCatcher

Yesterday, GameStop officially announced the inclusion of Bitcoin in the company's reserve assets, becoming the latest listed company to layout cryptocurrency. This veteran game retailer is trying to emulate Strategy's successful experience while seeking a breakthrough amid stagnant traditional business growth.

From the "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, net sales declined by $511 million year-on-year, and it closed 590 US stores within a year. Wedbush analyst Michael Pachter once rated GameStop as "underperform" and set a target price of $10, holding a pessimistic view of its prospects.

GameStop's fundamental problem lies in its core business being gradually eliminated by the market. As a traditional retailer relying on physical store sales of game hardware, software, and peripheral products, it has been ruthlessly marginalized by the rise of digital game downloads and e-commerce platforms. Facing the reality of declining sales and store shrinkage, GameStop was forced to embark on an aggressive and uncertain transformation path.

In the past few years, GameStop has continuously tried to reinvent itself: from promoting e-commerce business, adjusting investment strategies, to entering the Non-Fungible Token track by launching an NFT marketplace and digital asset wallet. Pachter directly stated: "GameStop's strategy has been adjusted about six times in the past three years", with the company constantly seeking a new direction for survival.

Now, GameStop has placed its chips on Bitcoin, attempting to open up an entirely new growth path. This new bet may determine its ultimate fate.

Imitating Strategy, Boldly Betting on Bitcoin with $1.3 Billion Bond

GameStop follows Strategy's classic strategy of financing Bitcoin purchases through convertible bond issuance.

The company plans to privately issue a total of $1.3 billion in 0.00% convertible senior notes, maturing in 2030. To further attract investment, GameStop has also granted initial purchasers a 13-day option to additionally purchase up to $200 million in notes.

These notes are GameStop's general unsecured debt, will not generate periodic interest, and the principal will not accumulate growth. 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 method to be determined by GameStop.

In related documents, GameStop clearly stated that its investment policy allows investment in certain cryptocurrency assets, including Bitcoin and US dollar stablecoins. Additionally, GameStop further revealed that the company may invest part of its cash, debt, or equity financing proceeds in Bitcoin in the future, with no set upper limit for Bitcoin holdings, and may also sell its held Bitcoin.

As of February 1st, GameStop's cash reserves were $4.77 billion, meaning the company has sufficient financial space for this strategic investment. The cross-border experiment of "MEME Stock + Cryptocurrency" is about to begin.

Beneficial to Crypto Market, But Not Necessarily Beneficial to GameStop?

After the announcement, GameStop's stock price rose 11.65% during trading hours but dropped 7.40% after-hours compared to the closing price. While this move injected new vitality into the crypto market, investors have differing views on GameStop's transformation prospects.

Since Strategy began purchasing Bitcoin in 2020, its stock price has risen 23-fold. However, whether this success can be replicated by GameStop remains highly uncertain.

Wedbush analyst Michael Pachter stated: "The issue is that Strategy's current trading price is about twice its Bitcoin holdings. If GameStop uses its $4.6 billion cash to fully purchase Bitcoin and trades at twice the Bitcoin holdings valuation, its stock price might actually drop by $5."

Market observers' criticisms are more direct:

Community member @KabraxFX said: "This means GME cannot find an effective way to use its massive cash reserves to develop its business. In my view, this is negative."

Investor @MonkEchevarria stated: "GameStop's move is indeed interesting, but Bitcoin cannot make up for its weak fundamentals. Exceeding earnings expectations is good, but it does not change its stagnant growth and soft cash flow. Price is not equal to value, and hype is not equal to strategy. From a perspective of more than three years, this looks more like an all-or-nothing turn rather than a genuine transformation."

Some even jokingly say that GameStop is now a hedge fund.

GameStop's story has always moved forward in disruption and controversy. Bitcoin may add a bright spot to GameStop's balance sheet, but it may not necessarily solve its business difficulties.

In this constantly changing story, the only certainty is uncertainty itself.