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GameStop lost over 9% on Thursday, just one day after jumping nearly 12% and finishing as the best performer in the S&P 500. The drop happened after the company said it would raise $1.3 billion through a convertible debt sale to buy Bitcoin, following a new crypto investment strategy approved by its board on Tuesday.
The company announced the plan publicly, triggering the selloff. The move involves issuing convertible senior notes that are due in 2030, and the deal would result in about 46 million new shares being created. That’s a huge dilution for existing shareholders.
The added funds would raise GameStop’s total cash from around $4.8 billion to about $6.1 billion, based on comments made by Michael Pachter, an analyst at Wedbush. The funding and dilution are being used to support a crypto investment strategy modeled after MicroStrategy’s playbook, but there are some sharp differences.
GameStop board approves Bitcoin strategy using debt and equity
On Tuesday, the full board at GameStop gave unanimous approval for the plan to buy cryptocurrencies using either the company’s current cash or future proceeds raised through debt or equity.
It’s the same playbook Michael Saylor’s Strategy (MicroStrategy) made famous, but this one’s happening with GameStop’s stock already trading way above book value.
In a note to clients, Wedbush’s Michael said:
“We suspect that GameStop’s share price will drift lower prior to the issuance of the convert, particularly given that a convert investor will receive a zero coupon and will be required to have faith that the GameStop meme phenomenon will persist for another five years.”
He added that he currently holds an underperform rating on the stock and doesn’t believe the crypto investment plan will deliver the kind of upside the company may be counting on.
GameStop is currently valued at $12.7 billion, which is already more than twice its expected cash position after the convertible note offering is finalized. By comparison, Strategy’s valuation sits at less than two times the market value of its Bitcoin holdings, which makes its investment strategy easier to justify from a balance sheet perspective.
“With GameStop already trading at more than 2x its cash holdings it is unlikely that its conversion of cash into Bitcoin will drive an even greater premium,” Michael added.
Meanwhile, broader markets also dropped on Thursday, hit by fresh trade news out of Washington. President Donald Trump, now back in office, made new tariff announcements that pulled stocks lower across sectors.
Trump announces 25% auto tariffs, markets drop
The Dow Jones Industrial Average fell 212 points, or 0.5%, while the S&P 500 lost 0.5%, and the Nasdaq Composite dropped 0.6%. Tech stocks got hit hard. Nvidia and Meta were both down about 1.5%, and almost every major tech company was in the red—except for Tesla, which went up by 2%.
The selling pressure came after Donald Trump announced on Wednesday night that he would enforce a 25% tariff on all cars not made in the United States starting April 2. The new duties rattled automaker stocks. General Motors dropped 8%, Stellantis lost about 4%, and Ford declined roughly 3%.
Trump said the new auto tariffs would stay in place for his full second term. He’s long pushed for tariffs against countries that put duties on U.S. imports, and this move is part of that agenda.
At the same time, he told reporters that the upcoming tariffs would be “very lenient” and that he’d consider lowering them on China if a deal can be reached involving ByteDance’s TikTok.
While trying to ease nerves about China, Donald Trump also threatened to hit Canada and the European Union with what he called “far larger” tariffs if they cooperate to push back against his trade policies. The combination of new duties and random negotiations left investors anxious and triggered more selling across multiple sectors.
Concerns about the economy made things worse. Consumer confidence is sinking again. A report from the Conference Board this week showed that consumer confidence fell to a 12-year low in March, another signal that shoppers and workers are feeling less optimistic. That report followed the University of Michigan Survey of Consumers, which also showed weakness in the same period.
After the tariff headlines hit the tape, stocks turned lower and pushed toward their intraday lows. That price action added more pressure to a week that was already unstable.
“[Wednesday] was a reminder that despite the recent rebound in stocks, volatility remains as policy uncertainty lingers,” said Daniel Skelly, who leads market strategy for Morgan Stanley’s Wealth Management group. “Moreover, next week’s tariff deadline will likely be more of a starting point for negotiations than a conclusion, so the market may struggle to recover in a straight line higher.”
For the week so far, the S&P 500 is up about 0.2%, the Nasdaq is just barely negative, and the Dow Jones is showing a 0.6% gain. That’s barely enough to keep the week green, and the Friday session still looms.
Traders now turn to two key data drops: jobless claims, due out Thursday, and the March reading of the personal consumption expenditures price index, which lands on Friday. The PCE index is the Federal Reserve’s favorite measure of inflation, and whatever comes out of it could shape the Fed’s next moves.
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