Shares of GameStop tumbled 22% on Thursday after the company’s plan to finance its bitcoin pivot raised questions about the timing of its move and its strategy to turn around its struggling retail business.
The video game retailer’s shares also gave up all their gains from a day earlier and were on track for their biggest one-day fall since last June, after the company said it was offering $1.3 billion in 0% 2030 convertible bonds to amass the cryptocurrency.
The company’s announcement that it would buy bitcoin to hold as a treasury reserve asset had created a mini euphoria among retail traders, who keenly track the so-called “meme stock.”
However, GameStop also announced the closing of a “significant number” of additional stores this year, signaling that its retail business continued to flounder despite attempts to turn it around.
“Investors are not necessarily optimistic on the underlying business,” said Bret Kenwell, US investment analyst at eToro.
“There are question marks with GameStop’s model. If bitcoin is going to be the pivot, where does that leave everything else?”
The timing of GameStop’s decision to buy bitcoin is also in focus as the cryptocurrency’s price has gained nearly 27% since November’s presidential election, though they are sharply down from record highs due to uncertain economic conditions.
“Why did (GameStop) wait so long if they were going to go down this road? Six months ago, nine months ago would have made a lot more sense,” Kenwell said.
The debt offering to fund bitcoin purchases mimics the playbook of Strategy, one of the largest individual holders of bitcoin that is widely seen as a bitcoin proxy.
The overall outlook for crypto markets was also contributing to declines as GameStop’s move has “failed to meaningfully boost market confidence,” said Agne Linge, head of growth at decentralized bank WeFi.
Shares closed at $22.09. With the day’s losses, GameStop shares have dropped 30% this year.
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