GameStop's Stock Plummets: Does Strategy's Bitcoin Approach Not Work?

TradingKey – Analysts suggest that the current market environment may not be ideal for launching a Bitcoin-centric strategy. Six to nine months ago, the diversification strategy of Strategy (formerly MicroStrategy)—which involved purchasing Bitcoin—was hailed as a classic example of successful corporate transformation. However, in today’s volatile market, GameStop’s (GME.US) attempt to replicate this approach appears to be struggling.

After surging 11.65% the previous day, GameStop’s stock plummeted 22.11% on Thursday, March 27, closing at $22.09—its largest single-day decline since June 2024. This dramatic rise and fall reflect a sharp reversal in investor sentiment regarding the company’s cryptocurrency-focused pivot.

On Tuesday, GameStop announced the issuance of $1.3 billion in convertible bonds, maturing in 2030, to invest in Bitcoin, following Strategy’s model of issuing debt rather than selling equity to fund cryptocurrency purchases. This method is generally seen as less dilutive to shareholders.

Initially, investors welcomed GameStop’s strategic shift toward diversification, given the declining performance of its core video game business—GameStop’s revenue fell 28% year-over-year in 2024. Additionally, Strategy's crypto-driven transformation offered a promising precedent: its stock surged over 350% in 2024.

However, this optimism quickly faded, as investors began reassessing the viability of GameStop’s Bitcoin strategy, particularly questioning the timing of the pivot and the company’s broader plans to revive its core business.

An analyst from eToro commented: “There are question marks with GameStop's model. If bitcoin is going to be the pivot, where does that leave everything else?”

Meanwhile, Donald Trump’s administration, despite being more Bitcoin-friendly, has failed to deliver significant upside surprises to the market. Bitcoin prices have retreated nearly 20% from their year-to-date peak.