GameStop Pivots to Bitcoin Amid Massive Store Closures

ByMason Drake

GameStop shares plummeted over 23% on Thursday following the video game retailer’s announcement of plans to raise $1.3 billion in debt specifically to purchase Bitcoin. The dramatic stock decline came just one day after an almost 12% rally, highlighting extreme market volatility as investors reacted to the company’s unexpected cryptocurrency strategy.

According to CNBC, the company intends to sell convertible senior notes due in 2030, a move that will require issuing approximately 46 million additional shares and boost the company’s cash position to about $6.1 billion from its current $4.8 billion.

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Store Closure Plans Intensify

Concurrent with its cryptocurrency announcement, GameStop revealed intentions to shutter a “significant number” of stores during fiscal year 2025. This continues a dramatic retail footprint reduction that has already seen nearly half of the chain’s global locations close in recent years.

IGN reports that the U.S. has experienced 590 location closures, bringing the domestic store count down to 2,325 as of February 1. Globally, GameStop now operates 3,203 stores, down significantly from its peak of approximately 6,000 locations.

The company has not specified which stores will be targeted in this latest closure round, leaving employees and customers in uncertainty as the retailer continues to shrink its physical presence amid shifting consumer habits toward digital game purchases.

Bitcoin Strategy Raises Questions

GameStop’s board “unanimously approved” the update to its investment policy, adding Bitcoin as a treasury reserve asset. The company has not established any maximum limit on its potential cryptocurrency holdings and reserved the right to sell acquired Bitcoin at its discretion.

This cryptocurrency strategy appears to mimic the approach popularized by MicroStrategy, which has aggressively converted corporate cash reserves into Bitcoin. However, analysts have expressed skepticism about GameStop’s ability to replicate that success.

“We suspect that GameStop’s share price will drift lower prior to the issuance of the convert, particularly given that a convert investor will receive a zero coupon and will be required to have faith that the GameStop meme phenomenon will persist for another five years,” Wedbush analyst Michael Pachter wrote in a note to clients.

Valuation Concerns

Critics point to GameStop’s already inflated market capitalization as a key differentiator from MicroStrategy’s situation. Currently valued at approximately $12.7 billion, GameStop trades at more than twice its projected cash balance after the convertible note issuance.

“With GameStop already trading at more than 2x its cash holdings it is unlikely that its conversion of cash into Bitcoin will drive an even greater premium,” Pachter noted, maintaining an “underperform” rating on the stock.

This isn’t the company’s first venture into cryptocurrency. GameStop previously launched a cryptocurrency wallet that it abandoned after just over a year of operation, raising questions about the retailer’s commitment to and expertise in the digital assets space.

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Retail Transformation Struggles

The Bitcoin pivot and store closures come amid GameStop’s ongoing struggle to reinvent itself in an industry increasingly dominated by digital distribution. The company announced significant job cuts in March 2024, with analysts expressing doubt about the possibility of meaningful revenue recovery.

Traditional video game retail faces existential challenges as publishers and console manufacturers emphasize direct-to-consumer digital sales, eliminating the need for physical game copies and the retailers who sell them. GameStop’s physical retail model has suffered accordingly, with the company searching for new revenue streams and business models.

Market Response

Despite Thursday’s dramatic share price decline, GameStop remains a focal point for retail investors who drove the original “meme stock” phenomenon in 2021. According to Axios, the stock initially traded up 15% on the morning after announcing its Bitcoin plans before the broader negative sentiment took hold.

The extreme volatility reflects ongoing tension between traditional valuation metrics, which suggest GameStop is significantly overvalued, and the continued interest from retail investors who have repeatedly demonstrated willingness to invest based on non-traditional factors.

As GameStop continues its transformation, the company appears to be betting that cryptocurrency investments will provide a new narrative to sustain investor interest while it navigates the existential challenges facing physical video game retail.

Mason Drake

Mason has been covering the exciting and fast-pasted crypto space since the early days of Bitcoin. From decentralized finance to NFT trends, he provides deep analysis on where the industry is headed and what it means for investors.

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