GameStop Joins The Bitcoin Treasury Game

GameStop is back in the headlines, and this time it has nothing to do with Roaring Kitty. During its Q1 2025 earnings report this Tuesday, GameStop reported that its board had approved the addition of Bitcoin as a treasury reserve asset. This means the company is now authorized to invest a portion of its cash or future debt and equity issuances in Bitcoin.

According to its most recent 10K filing, the company is currently sitting on more than $4.7 Billion worth of cash and cash equivalents. Which is a massive pile relative to the size of its operations. The company made $120 Million in operating income last year. The source of the current cash position was a series of timely equity offerings during one of the stock’s volatility episodes. During 2024 short squeeze dynamics drove the price much higher, which allowed the company to issue shares, diluting common shareholders by approximately 15% and raising the company over $3.4 Billion in cash. In other words, the company sold shares at a valuation of approximately ~$22.5 Billion, and it’s currently trading at ~$10 Billion. It was an opportunistic move to capitalize on a high share price and has played out very well for the company’s cash position.

In addition to the $4.7 Billion in cash and cash equivalents, the company has also announced it will be issuing a 0% convertible note for $1.3 Billion, with potential to expand the offering to $1.5 Billion. The sale of the $1.3 Billion convertible note is expected to be completed by April 1st, 2025, and participants will have 13 days to exercise their option to invest up to $200 Million more. The company expects to have net proceeds of $1.28 billion ,or approximately $1.48 billion if the options for further investment are fully exercised.

The notes have a 5-year term, maturing on April 1st, 2030. The conversion price for the notes is equivalent to $29.85 per share, which represents a 35% increase from today’s closing price of $22.09. This means that for every $100,000 invested in the note, an investor could get 3,350 shares of GameStop if the shares reach the conversion price or go above it. If it doesn’t, the note investors are first in line to get repaid in full. Thus, the attractiveness of this note lies in the option to convert the principal into shares if things go well for the company.

To give you a sense of the implied yield that the convertible notes are getting by way of the option to convert into shares, a call option to purchase a share of GameStop at $30 on January 15th, 2027 trades for $8.08. This means that for every $100,000 invested, which would result in 3,350 shares, an investor would be getting well over $27,000 in “option value” (3,350 * $8.08). Keep in mind that the same option going out until April 30th 2030 instead of January 15th 2027 would be much more valuable due to having a longer duration. So it’s safe to assume that note investors are getting an implied total yield of well over >30% on their investment, or an equivalent of well over >6% annualized, if we quantify the value of their option to convert.

Given the company’s new investment and treasury policy, it shouldn’t be long until we hear about their first Bitcoin allocation or purchase. With this note issuance GameStop now officially joins the ranks of Strategy, Metaplanet, and Samara Asset Group as the 4th publicly listed company to issue debt to purchase bitcoin.