Stock Price of GameStop Plummets Following $512 Million Bitcoin Investment
GameStop's Stock Slides After Bitcoin Investment
Prominent video game retailer GameStop saw its stock price plummet for the second consecutive day following Wednesday's announcement of an over $500 million Bitcoin purchase. GME closed Thursday's trading down more than 5%, settling at $29.57 per share.
The Nasdaq-listed stock experienced a near 11% daily decline on Wednesday, erasing most of the weekly gains and, currently, standing just over 1% higher than last week. GME's share price reached its highest level in nearly a year on Wednesday, briefly surpassing $36 at the opening bell, inspired by the return of meme stock influencer Keith Gill, also known as Roaring Kitty.
An initial Bitcoin-related volatility flare-up occurred when GameStop first disclosed its plans to add Bitcoin to its treasury assets in late March. The stock price soared, only to drop soon after when the company announced plans to raise up to $1.5 billion to buy BTC rather than leverage its cash reserves.
Market indices were slightly green on Thursday, with the Nasdaq and S&P 500 increasing by approximately 0.4%, despite news like a U.S. trade court pushing back on President Trump's tariffs and an economic report indicating a contraction in GDP.
GameStop officially acquired 4,710 Bitcoin, valued at roughly $512 million at the time of purchase. As of this writing, this stake is approximately $499 million in value. The company has triggered concerns among investors with this substantial investment, which depleted around 10% of its cash reserves.
GameStop's CEO, Ryan Cohen, hinted at potential future Bitcoin buys during a video interview at Wednesday's Bitcoin conference, stating, "We're not going to call our shots in advance." Strategy, the largest corporate Bitcoin treasury holder with over $61 billion worth of Bitcoin, paved the way for this model, boosting its stock and inspiring other firms to adopt similar crypto strategies.
However, GameStop investors appear less enthusiastic about the company's latest crypto commitment. The retailer's shift toward digital currencies raises questions about its ability to address core business challenges, such as digital game sales diminishing demand for physical games[1][3]. The investment may not address the underlying issues impacting the company's core business[1].
[1] CNBC. (2021, March 23). GameStop's Bitcoin investment overshadows hints of further retail growth. Retrieved from https://www.cnbc.com/2021/03/22/gamestop-bitcoin-investment-overshadows-hope-of-future-retail-growth.html[3] MarketWatch. (2021, March 19). The biggest danger for GameStop now: Its own business model. Retrieved from https://www.marketwatch.com/story/the-biggest-danger-for-gamestop-now-its-own-business-model-11615830751
- The finance world is abuzz with the news that GameStop, known for its physical video game sales, has invested over $500 million in Bitcoin, a form of cryptocurrency often referred to as BTC.
- This move by GameStop follows Ethereum, another popular cryptocurrency, as businesses increasingly explore Initial Coin Offerings (ICO) and integration of crypto into their business strategies.
- GameStop's decision to invest in Bitcoin has raised concerns among some investors, as it represents a significant portion of the company's cash reserves and may divert attention from addressing challenges within its core business, such as declining demand for physical games.
- The crypto market itself is progressively influencing the business landscape, with companies like GameStop looking to Bitcoin and other digital currencies as possible avenues for financial growth and diversification, even as traditional stock markets like the S&P 500 continue to operate.
