GameStop’s Bitcoin Gamble: Stock Price Surges on Rumors
GameStop, the poster child of the meme stock frenzy, saw its share price jump in after-hours trading Thursday, fueled by whispers of a potential investment in Bitcoin and other cryptocurrencies.
CNBC, citing sources, reported that GameStop is exploring cryptocurrency investments, including Bitcoin. The news triggered a 20% surge in its stock price after hours, before it settled around $26.34.
GameStop’s claim to fame stems from the 2021 short squeeze orchestrated by retail investors, propelling its stock to dizzying heights. While subsequent rallies have occurred, often tied to the reappearance of “Roaring Kitty” Keith Gill, the company’s underlying business has struggled.
Business Challenges and the Lure of Crypto
GameStop, a traditional brick-and-mortar retailer of games and collectibles, has been grappling with the industry’s digital transformation. Wall Street remains largely skeptical, with Wedbush analyst Michael Pachter reiterating an “underperform” rating and a $10 price target, suggesting the company’s core business is near worthless.
Pachter highlighted the “insurmountable obstacles” GameStop faces, with its core business of physical game sales declining due to digital downloads and cloud gaming. Cost-cutting has delivered short-term profits, but long-term growth prospects are dim.
A New Hope?
GameStop’s initial foray into crypto began in 2022 with a crypto wallet and a partnership with Immutable, a blockchain gaming network, to support the trading of digital collectibles. However, the NFT marketplace was shuttered in early 2024 due to “regulatory uncertainty.” Despite this, GameStop has maintained an interest in the crypto sector.
The current Bitcoin investment rumors coincide with a more perceivedly crypto-friendly environment. This shift in the regulatory climate may be influencing GameStop’s renewed interest.
Adding to the speculation, GameStop CEO Ryan Cohen was recently photographed with Michael Saylor, the head of MicroStrategy, a company known for its massive Bitcoin holdings. MicroStrategy’s Bitcoin treasury, valued at over $46 billion, has yielded substantial returns, inspiring other corporations to embrace Bitcoin as a reserve asset.
Sherwood analyst Luke Kawa noted the stock’s jump following Cohen’s photo, suggesting investors believe GameStop might follow MicroStrategy’s Bitcoin-buying strategy. “The market’s enthusiastic response… suggests traders are hoping Cohen will use GameStop’s $4.6 billion in cash… to follow Michael Saylor’s playbook,” Kawa explained. “That strategy has one rule: Buy Bitcoin.”
Whether GameStop will definitively enter the crypto arena remains unconfirmed, but the rumors have injected considerable excitement into the market.
Cohen’s $4.6 Billion Question
Ryan Cohen, the co-founder of Chewy, joined GameStop’s board in 2021. He has spearheaded efforts to cut costs and streamline operations. GameStop currently holds $4.6 billion in cash and cash equivalents.
In late 2023, GameStop’s board authorized a new “investment policy,” empowering Cohen and others to manage the company’s investments. These investments must adhere to guidelines or receive board approval.
While GameStop faces significant headwinds, Bitcoin, with its volatility and potential for high returns, could offer a new path to growth. Whether this gamble pays off remains to be seen.
