Meme stock pioneer GameStop, after announcing its entry into the Strategy Bit Treasury Reserve Policy, is preparing to issue $1.3 billion in convertible debt to buy Bit. GameStop's stock (ticker GME) rose over 11% yesterday on the Bit reserve news, but dropped 8% after-hours due to the convertible debt announcement. The rise of Bit reserve strategy companies continues, and investors may need to observe the pricing and fundraising amount of the convertible debt.

(GameStop Joins Bit Reserve Strategy Company! Is the Meme Craze Returning?)

GameStop Plans to Issue $1.3 Billion Convertible Debt

GameStop announced a private offering of convertible senior notes, which will mature in 2030. GameStop also plans to grant the initial purchasers an option to buy up to an additional $200 million in principal amount of notes within 13 days of the initial issuance.

The notes will be GameStop's general unsecured debt, will not generate periodic interest, and the principal will not accumulate. The notes will mature on April 1, 2030, unless converted, redeemed, or repurchased early. Upon conversion, GameStop will pay or deliver cash, GameStop Class A common stock, or a combination of cash and Class A common stock, depending on the circumstances. The initial conversion rate, repurchase or redemption rights, and other terms will be determined at the time of pricing.

GameStop expects to use the net proceeds from this offering for general corporate purposes, including acquiring Bit in a manner consistent with GameStop's investment policy.

Bit Reserve Strategy Companies Continuously Emerging, Will Investors Continue to Buy In?

The Bit reserve strategy pioneer, Strategy, announced its Treasury Reserve Policy as early as September 2020, a policy that uses Bit as the company's primary reserve asset. The company continues to buy Bit using cash flow from its core business, as well as through debt and equity financing transactions.

Currently, about 80 global listed companies, including mining companies, pharmaceutical companies, and advertising firms, are buying Bit to replace their cash reserves.

According to GameStop's latest financial report, its fourth-quarter revenue decreased 28% year-on-year to $1.28 billion, and it will close more stores. Hardware, accessories, and software sales declined this quarter, while collectible sales increased.

With the slowdown in its gaming business, GameStop has been seeking diversification. Will this Bit business bring new opportunities?

(Strategy Leads the Trend, A Comprehensive Guide to Bit Reserve Strategy Company Investments)

GameStop's stock (ticker GME) rose over 11% yesterday on the Bit reserve news, but dropped 8% after-hours due to the convertible debt announcement. Investors may need to observe the pricing and fundraising amount of the convertible debt.