US-based video game retailer GameStop Inc. (GME) is joining other companies that have added Bitcoin to their asset portfolio after completing a $1.5 billion offering of convertible senior notes, which funds it plans to use, in part, to acquire Bitcoin for its corporate treasury.
According to a recent press release and regulatory filings the company submitted to the US stock market, GameStop successfully raised a full subscription amounting to $1.3 billion in a five-year convertible note offering. Considering there was an overallotment option, the total amount of funds the company raised amounted to $1.5 billion, with net proceeds of $1.48 billion after deducting expenses.
Not Using Firm’s Money
The company’s filing with the US Securities and Exchange Commission (SEC) states that the senior convertible notes will mature, further stating that GameStop expected to:
“Use the net proceeds from the offering for general corporate purposes, including the acquisition of Bitcoin.”
By selling senior convertible notes instead of using the firm’s money, GameStop has decided to follow in the footsteps of Strategy (formerly MicroStrategy). This company currently holds the record of the public company with the most significant Bitcoin holdings in its treasury. At the time of writing, Strategy reportedly has at least 528,185 BTC, or just over $45 billion worth, since it began its Bitcoin acquisition spree in 2020. The company allegedly acquired an additional 22,048 BTC for $1.92 billion this week at an average price of $86,969 per Bitcoin.
Footsteps of Strategy
When he announced the company’s fourth-quarter financial results, GameStop CEO and chairman of the board of directors, Ryan Cohen, stated that the company had resolved to update its investment policy. He said the update included allocating funds to enable the firm to add Bitcoin to its balance sheet. Ryan recently shared a photograph of himself with Strategy CEO Michael Saylor, spearheading institutional Bitcoin acquisition. The announcement by GameStop’s Bitcoin strategy reportedly spurred a spike in the company’s stock price, but investor reaction within the cryptocurrency market has been less enthusiastic.
Previous Attempts in Crypto Space
This will not be the video game retailer’s first foray into crypto. GameStop previously launched a cryptocurrency wallet but had to discontinue the plans in November 2023, citing regulatory concerns. The firm also attempted a meme stock sometime in 2021 that surged over 1000% within a month, with traders flipping the table on hedge funds that had been making money shorting on the company.
Conclusion
GameStop’s decision to use senior convertible notes to join a growing list of companies increasing their exposure to Bitcoin comes as the market has adopted a wait-and-see mode following Trump’s anticipated tariff announcement. The company joins others, including Strategy, Metaplanet, and MARA Holdings, that have made significant moves to increase their Bitcoin holdings.
Frequently Asked Questions (FAQs)
What are senior convertible notes?
Senior convertible notes are debt instruments that offer holders the option to convert their notes into equity at a set price or redeem them for cash.
How do convertible senior notes work?
The owner of a senior convertible note can convert the debt into equity in the company. If the company goes bankrupt, noteholders prioritize repayment over the holders of other kinds of debt. When the company does well, holders can convert the notes into valuable shares.
What happens when convertible notes mature?
When a convertible note reaches its maturity date, holders can either convert and gain equity in the company or choose not to convert, and the principal and interest are due as debt. The decision of whether to convert or not convert is up to the investor.
Why do companies issue senior notes?
Senior notes are a form of debt financing that gives the lender priority claim to assets and cash flows in the event of default or bankruptcy.
Appendix: Glossary to Key Terms
Bitcoin: A type of decentralized digital payment system and currency.
Crypto portfolio: A collection of different cryptocurrencies an investor holds, similar to a traditional stock portfolio, but focused on digital assets like Bitcoin, Ethereum, and altcoins.
Corporate treasury: A department within a company responsible for managing and controlling its digital assets and financial resources to achieve business goals.
References
Read More: GameStop in Major Bitcoin Move with $1.5B Offering to Fuel Acquisition“>GameStop in Major Bitcoin Move with $1.5B Offering to Fuel Acquisition
The Bit Journal – Read More