Shares in GameStop experienced a downturn on Thursday, reversing gains made earlier in the week. This shift followed the announcement that the retailer was transitioning from primarily selling video games to investing in Bitcoin.
On Tuesday, the company disclosed that its board of directors had voted to secure $1.3 billion for purchasing Bitcoin, while simultaneously planning to close a “substantial number” of their brick-and-mortar locations. The news initially resulted in a 14% rise in stock value on the same day, but this surge proved short-lived. As of Thursday, shares of the video game company had decreased by 23% over the preceding 24 hours.
According to an SEC filing, GameStop intends to allocate a portion of its available funds or future debt and equity to Bitcoin investments. The company plans to fund these Bitcoin purchases by offering convertible senior notes, which combine debt and equity financing, to its investors. The stated objective of this new investment approach is to maintain sufficient liquidity to cover the company’s daily financial obligations and to maximize investment returns, as detailed in the SEC filing.
GameStop has faced significant challenges in recent years and played a pivotal part in one of the decade’s most unconventional business stories. This was triggered by an unforeseen surge in its stock price in 2021, fueled by a retail investor movement. Despite the dramatic increase in share value (later immortalized in film), the company is grappling with a long-term decline in customer demand for physical video games in favor of digital alternatives. GameStop’s SEC filing from Tuesday indicates a 28% decrease in sales between 2023 and 2024, from $5.3 billion to $3.8 billion, as well as the closure of a quarter of its stores in the past year.
Fortune has reached out to GameStop for comment, but has not received an immediate response.
GameStop is not the only entity diversifying its focus toward cryptocurrency investments. The software company Strategy adopted Bitcoin as a reserve asset in 2020, and its stock value has since grown by over 3,000% in the last five years after accumulating 500,000 Bitcoins. The firm’s stock has become desirable to investors seeking exposure to Bitcoin’s price fluctuations without directly holding the cryptocurrency.
However, the Strategy’s success with this strategy may not be easily replicated. Michael Patcher, an analyst at Wedbush Securities, commented to Fortune that GameStop’s stock will be more expensive and provide less direct exposure to Bitcoin in comparison.
Patcher noted, “Corporations have access to opportunities in cryptocurrency investment that are unavailable to individual investors, which explains some of Strategy’s appeal,” referencing Strategy by a former company name. He added, “However, Strategy trades at a smaller premium to its liquid assets than GameStop.”