The debt offering is being made at a significant markup over the company’s valuation. Additionally, it may exclude a considerable segment of GameStop’s shareholder base that may not meet the specific investor criteria, as noted by Wedbush analyst Michael Pachter.
“It’s difficult to comprehend why any investor would opt to pay more than double the cash value for the chance that GameStop could transform that cash into Bitcoin, especially when the same investors have the option to invest in Bitcoin or a Bitcoin ETF directly themselves,” he remarked in the note.
The firm currently possesses roughly $4.8 billion in cash, and the conversion would increase this to $6.1 billion, according to him. Meanwhile, the stock has an estimated valuation of approximately $12.7 billion.
GameStop’s stock has considerably decreased since last May, when key investor Keith Gill, widely known as “Roaring Kitty,” made his first online appearance in three years to express his backing for GameStop.
Gill played a pivotal role in sparking a “meme” stock phenomenon in early 2021, during which GameStop’s share price skyrocketed beyond $120.
“Despite the absence of a clearly defined strategy, GameStop has repeatedly managed to leverage the presence of a ‘greater fool’ willing to pay more than double its asset value for its shares, and thus far, they’ve been successful,” Pachter noted.
Even with their concerns regarding the debt offering and Bitcoin strategy, analysts at Wedbush stated in a separate commentary that they were “impressed” by GameStop’s achievement of generating an operating profit in the fourth quarter of 2024 and “are more confident than ever that GameStop can reach breakeven results for the foreseeable future.”
