GameStop stock rises as company plans to purchase bitcoin and shutter brick-and-mortar stores
GameStop recently announced that its board has approved the addition of bitcoin as a treasury reserve asset. This decision caused GameStop shares to increase by 7% to $27.23 in after-hours trading. The move by GameStop follows the actions of Strategy, the largest corporate holder of bitcoin, which rebranded itself in February to emphasize its commitment to the cryptocurrency space.
Strategy stated that the rebranding was a natural evolution as it incorporates bitcoin into its business operations. Additionally, GameStop posted an increase in fourth-quarter profit, attributed to cost reduction efforts amidst a slow turnaround in its retailing of video game hardware and merchandise. President Trump’s executive order to establish a strategic reserve of cryptocurrencies further influenced GameStop’s decision to invest in bitcoin.
GameStop plans to utilize a portion of its cash, future debt, or equity issuances for bitcoin investments, without specifying the maximum amount it may purchase. Notably, GameStop’s fourth-quarter net income more than doubled from the previous year, indicating a positive financial outlook for the company.
However, GameStop has faced challenges in its primary business due to the shift towards digital downloads, game streaming, and online shopping. To counter these challenges, GameStop has been actively cutting costs by closing stores. In fiscal year 2024, the company closed 590 stores in the United States and anticipates closing more in fiscal year 2025. Despite these closures, GameStop reported fourth-quarter revenue of $1.28 billion, a decrease from $1.79 billion in the previous year.
The company’s involvement in the meme stock trading frenzy has also impacted its operations, prompting GameStop to adapt its strategies and investments. By incorporating bitcoin into its treasury reserve assets, GameStop aims to diversify its portfolio and align with current trends in the cryptocurrency market. This strategic move reflects the company’s willingness to adapt to changing market conditions and explore new opportunities for growth.
Overall, GameStop’s decision to invest in bitcoin signifies a bold step towards embracing digital assets and adapting to the evolving landscape of the financial industry. As the company navigates these changes, it remains focused on optimizing its operations and financial performance to sustain its position in the market.
