Grapevine, Texas-based GameStop is joining a growing list of public companies taking out convertible debt to buy bitcoin in an attempt to profit from the cryptocurrency's surge.
A convertible bond is a hybrid instrument that allows the holder to convert the bond into a predetermined number of shares if the stock rises above a certain level. GameStop sells its bonds, which mature in 2030, with a conversion premium of 35-40%. The premium determines the price at which the conversion occurs.
GameStop's entry into the market comes even as investors appear to be growing increasingly skeptical of the strategy. The premium GameStop is seeking to offer on its bonds is less than the roughly 55% premium paid on a similar issue by Strategy in November.
GameStop's push to quickly ramp up its Bitcoin purchases comes against a very different backdrop than when Strategy and other imitators flooded the market in late 2024. The cryptocurrency is down about 18% from its all-time high in January, and investors are fleeing various riskier assets amid tariff uncertainty and volatile economic data.
However, the tactic is attractive to GameStop as the company seeks to diversify away from its core business, which has slowed due to the shift of video games to digital technology.
Source: Bloomberg
