GameStop (NYSE ticker: GME) announced a private offering of convertible senior notes totaling $1.75 billion to raise new funds. Analysts speculate that the funds from this private offering might be used to purchase BTC as company reserves. However, unlike other companies whose stock prices soared after announcing BTC purchases, GameStop's stock price did not rise but continued to decline.
Convertible senior notes are debt instruments that can be converted into the issuing company's stock and have a higher priority in the company's capital structure. These notes allow investors to enjoy fixed interest income, but such interest is typically calculated cumulatively and not paid in cash, so the company's debt to investors increases correspondingly over time.
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ToggleGameStop Stock Price Drops Due to First Quarter Performance
GameStop released its Q1 financial report, with net sales of $732.4 million, compared to $881.8 million in the same period last year. The Q1 performance significantly declined compared to the previous year, and the stock price dropped 5.31% after-hours on June 10 following the report.
GameStop Recently Purchased $513 Million in BTC
Although GameStop did not explicitly state that the funds from this issuance would be used to purchase more BTC, the company indicated that the funds would be used for investments aligned with its overall strategy. Recently, GameStop raised $1.5 billion through convertible notes, with part of the funds used to purchase 4,710 BTC on May 28, with a market value of approximately $513 million.
Will Investors Buy In? GameStop Finances BTC Purchase via Priority Notes
For listed companies seeking to use BTC as reserves, convertible senior notes are a common leverage tool. According to Bitcoin Treasuries.NET, GameStop currently holds 4,710 BTC, making it the 13th largest BTC holder. This $1.75 billion private offering has a 0% interest rate, with convertible senior notes maturing on June 15, 2032. The offering includes an option for initial purchasers to potentially buy an additional $250 million in notes, which can be converted to cash, GME stock, or a combination, depending on GameStop's decision.
GME's stock price has continued to decline since its first BTC purchase. According to Google Finance, the stock has dropped 18.5% since announcing BTC purchase on May 28. Including the 11.7% after-hours decline, GameStop has erased all gains since first announcing BTC investment on March 25. GME's stock trend starkly contrasts with most listed companies whose stock prices rise after announcing or planning BTC purchases.
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