GameStop Enters the Bitcoin Treasury Arena

GameStop is making headlines again, this time without any involvement from Roaring Kitty. In its Q1 2025 earnings report released this Tuesday, GameStop revealed that its board has sanctioned the incorporation of Bitcoin as a treasury reserve asset. Consequently, the company is now permitted to allocate a portion of its cash, alongside potential future debt and equity issuances, into Bitcoin.

As per its latest 10K filing, the company boasts over $4.7 billion in cash and cash equivalents. This amount is substantial compared to its operational scale, as the company reported an operating income of $120 million last year. The bulk of its current cash reserve came from a succession of well-timed equity offerings during a volatile period for the stock. The short squeeze dynamics of 2024 propelled the stock price higher, allowing the company to issue shares—resulting in a dilution of common shareholders by about 15% and raising over $3.4 billion in cash. Essentially, the company divested shares at a valuation of around $22.5 billion, while it presently trades at approximately $10 billion. This was a strategic initiative that leveraged a peak share price, greatly benefiting the company’s cash reserves.

In addition to the $4.7 billion in cash and cash equivalents, the firm has also announced plans to issue a 0% convertible note valued at $1.3 billion, with an option to extend the offering to $1.5 billion. The anticipated completion date for the $1.3 billion convertible note sale is April 1, 2025, with participants given a 13-day window to opt for an additional investment of up to $200 million. The company projects net proceeds of $1.28 billion, or approximately $1.48 billion if all additional investment options are exercised.

The notes will have a 5-year duration, maturing on April 1, 2030. The conversion price for these notes is set at $29.85 per share, reflecting a 35% increase from today’s closing price of $22.09. This translates to an investor putting in $100,000 potentially receiving 3,350 GameStop shares should the stock reach or exceed the conversion price. If not, the note investors will be prioritized for full repayment. Thus, the appeal of this note stems from the option to convert the principal into shares if the company performs well.

To illustrate the implied yield these convertible notes offer through the conversion option, a call option for a GameStop share at $30, expiring on January 15, 2027, is currently priced at $8.08. Thus, with a $100,000 investment, which would yield 3,350 shares, an investor would effectively acquire over $27,000 in “option value” (3,350 * $8.08). Note that an option extending to April 30, 2030, instead of January 15, 2027, would significantly increase in value due to a longer duration. Therefore, it’s reasonable to conclude that note investors are achieving an implied total yield exceeding 30% on their investment, translating to over 6% annualized, when factoring in the conversion option value.

With the company’s newly established investment and treasury policy, we may soon learn about their initial Bitcoin purchase or allocation. As a result of this note issuance, GameStop officially joins the ranks of Strategy, Metaplanet, and Samara Asset Group as the fourth publicly traded company to leverage debt for Bitcoin acquisition.