GameStop, a well-known video game retailer, has announced its decision to include bitcoin in its financial portfolio, attracting significant investor interest.
Following the revelation that its board has approved the allocation of cash and future debt towards bitcoin, GameStop’s stock surged by 8.3% after hours on Tuesday. This increase came despite the company’s report of a 28% decline in fourth-quarter revenue, totaling $1.28 billion, when compared to the same quarter in 2023.
Last month, shares of GameStop saw a 10% increase after a CNBC report indicated the company was contemplating cryptocurrency investments from its $4.6 billion cash reserves.
This strategic move mirrors that of software firm Strategy, which has been accumulating bitcoin since October. Just last week, Strategy added $10.7 million worth of the cryptocurrency to its existing holdings of $41.6 billion. Earlier in February, GameStop’s CEO, Ryan Cohen, hinted at a potential investment decision by sharing a picture with Strategy co-founder Michael Saylor on social media platform X.
GameStop has stated that there is no limit on the quantity of bitcoin it intends to acquire and retains the option to sell any bitcoin obtained.
This announcement follows weeks after pro-crypto President Donald Trump enacted an executive order to create a strategic reserve of cryptocurrencies with tokens already in government possession.
Companies such as Tesla, Coinbase, Riot Platforms, and Block have all invested in bitcoin. Many investors perceive companies with substantial bitcoin reserves as a safer alternative to direct cryptocurrency investments.
Bitcoin’s value has increased by 24% in the past year, fueled by a supportive U.S. presidential administration toward cryptocurrency.
Memestock frenzy
GameStop, known for selling physical games and hardware, is facing challenges due to shifting trends in the video game industry, with a growing number of consumers opting for digital downloads and streaming services.
The company previously emerged as a primary benefactor of the meme stock phenomenon in January 2021, attracting a wave of novice investors using the trading app Robinhood to purchase stocks from companies they admired. Over the past five years, GameStop’s stock has skyrocketed over 2,200%, though it has dipped 19% this year.
Robinhood faced criticism for abruptly limiting trading on these meme stocks, along with accusations of gamifying short-term investing, which has been argued to pose significant financial risks.
In 2021, Robinhood’s CEO, Vlad Tenev, along with Wall Street hedge fund managers, were scrutinized during a congressional inquiry into the trading frenzy surrounding GameStop. However, in 2023, a federal judge dismissed a lawsuit concerning the matter, ruling that customer agreements permitted Robinhood to restrict transactions.
