Retail Enthusiasm For GameStop Holds Steady Even As Stock Loses One-Fifth Value On Plan To Buy Bitcoin With Debt

Shares of GameStop Corp (GME) tumbled over 22% on Thursday before paring some losses in after-hours trading, in the aftermath of the company's decision to raise $1.3 billion from convertible bonds to buy Bitcoin.

The stock closed at $22.09, its second-lowest level this year, after its worst session in over nine months.

GME was one of the top 10 trending tickers on Stocktwits as of the time of writing, and retail sentiment has been climbing gradually over the last few days.

On Tuesday, the video games retailer said its board had approved the future purchases of Bitcoin as a treasury asset. It means GameStop will purchase the cryptocurrency as a store of value through cash and future equity and debt issuances.

The stock initially rose — climbing 11.7% on Wednesday — on the expectation that the move would link GME shares to the price of Bitcoin (BTC.X) and set them up for potential upward swings.

However, shares saw a broad selloff soon after the company announced the debt raise.

Firms marketing large convertible debt sales tend to face short-term selling pressure.

To be sure, GameStop currently has $4.8 billion in its cash reserve.

Grapevine, Texas-based GameStop is the latest public company taking on convertible debt to buy Bitcoin in an attempt to capitalize on upswings in the cryptocurrency.

Strategy, the software firm formerly known as MicroStrategy, has accumulated over $40 billion in Bitcoin and experienced a significant rise in its stock value.

Bitcoin has been highly volatile since Donald Trump’s election victory last year, shedding nearly 18% from its December peak as the new administration’s cryptocurrency reserve plans and regulatory moves have failed to inspire confidence.

On Stocktwits, retail investors' sentiment for the company's shares is 'extremely bullish'. Message volume is up over 1,000% compared to the previous week.

A user posted his analysis of GameStop's strategy, saying that shareholders might see more dilution of their shares but are happy as long as the stock goes up.

However, if Bitcoin’s rough patch continues, the company might have to sell its holdings to meet its debt repayment obligations.

One bearish user remarked that GameStop cannot be compared with Strategy as it might fail copying the software company's move.

GME shares are down 29.5% year to date.

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