GameStop Raises $450 Million in Second Funding Round, Expands Bitcoin Holdings

GameStop has successfully raised an additional $450 million through a follow-on sale of zero-coupon convertible senior notes, bringing its total fundraising to $2.7 billion in less than two weeks. The company disclosed this in a filing to the US Securities and Exchange Commission on Tuesday. This second round of funding follows the initial $2.25 billion raised last month through a private placement. The notes, due in 2032, can be converted into GameStop Class A shares at a rate of $28.91 per share, which is a 32.5% premium compared to the stock’s volume-weighted average price as of June 12—the day the first offering launched.

The funds raised are intended for general business use and for making investments in line with GameStop’s Investment Policy, which includes purchasing Bitcoin to hold on the company’s balance sheet. GameStop began acquiring Bitcoin in May, purchasing 4,710 coins with part of the proceeds from a $1.3 billion convertible note sold earlier this year. This initial round of buying cost around $500 million. The company is now adopting a strategy similar to that of Michael Saylor’s company, Strategy, which became the largest corporate owner of Bitcoin by selling equity and issuing debt to continuously acquire more. This approach has also resulted in significant price fluctuations for Strategy’s stock over the past few years.

Strategy utilized various types of securities, including convertible debt, to buy Bitcoin. GameStop is now following the same approach. CEO Ryan Cohen has stated that the move to accumulate Bitcoin is a response to macroeconomic risks, highlighting the asset’s fixed supply and decentralized structure as a potential hedge against these risks. Cohen is also close friends with Saylor, as indicated by their social media accounts.

On the same day the company announced the second note sale, it reported a 17% drop in revenue for the fiscal first quarter, down to $732.4 million. The demand for digital games is increasing, while foot traffic in physical stores continues to decline. GameStop’s core business, which involves the retail sale of new and used games and consoles, is still experiencing a slow decline. Analysts have expressed skepticism about the company’s strategy. Michael Pachter reiterated his underperform rating on GameStop, stating that the company is appealing to “greater fools” who are willing to pay more than double the value of the company’s assets. Pachter also noted that GameStop is already trading at 2.4 times cash and sees no upside from using that cash to buy Bitcoin, stating that the strategy makes little sense.

Despite the criticism, Cohen is steering the company in new directions. At the annual meeting, he announced that GameStop is expanding its collectibles business, describing trading cards as a “natural extension” of the brand. He highlighted the segment’s high margins and its deep roots in retail. While the gaming industry is increasingly digital, the collectibles market, particularly trading cards, remains robust. GameStop reported a 54% increase in collectibles revenue in the first quarter compared to the previous year, with most of the growth driven by sales of Pokémon Trading Cards. A survey showed that 19% of adults had purchased Pokémon cards for themselves within the last six months, with most buyers collecting them for fun or as room decoration. Adults were also the biggest spenders across all age groups when it came to toys in the first quarter.

GameStop’s strategy of accumulating Bitcoin and expanding its collectibles business is a bold move, but its effectiveness remains to be seen. The company now has $2.7 billion in its coffers, Bitcoin on its balance sheet, and a CEO who is betting on both collectibles and cryptocurrency. This dual approach reflects a broader shift in the company’s focus, moving away from its traditional retail business towards more speculative and potentially high-reward investments.