ABBO News

Gamestop nyse Gme Stock Tumbles on 3 Billion Convertible Notes Offering

GameStop (NYSE: GME) Stock Tumbles on $1.3 Billion Convertible Notes Offering

GameStop (NYSE: GME) shares tumbled more than 6% in pre-market trading Thursday after the company announced a $1.3 billion private offering of convertible senior notes to qualified institutional buyers.

Gamestop nyse Gme
Gamestop Stock Price Chart

The proposed offering consists of 0.00% Convertible Senior Notes due in 2030, meaning they will not bear regular interest, nor will the principal amount accrete over time. GameStop has also granted initial purchasers an option to buy an additional $200 million worth of notes within 13 days of the issue date. The conversion rate and other specific terms will be determined at the time of pricing.

Investor reaction to the news has been cautious, as convertible note offerings can dilute existing shares if noteholders choose to convert their holdings into equity. Furthermore, the structure of these notes, which do not generate interest payments, adds uncertainty regarding the company’s approach to debt management.

GameStop stated that it plans to use the proceeds for general corporate purposes, including an investment in Bitcoin as part of its broader investment strategy. This decision introduces another layer of risk, as exposure to cryptocurrency markets could increase volatility in the stock, given Bitcoin’s fluctuating value.

The development comes shortly after GameStop (NYSE: GME) released its fourth-quarter earnings report. The video game retailer posted adjusted earnings per share of $0.29, beating analysts’ expectations of $0.09. However, revenue fell to $1.28 billion from $1.79 billion a year ago, missing forecasts of $1.5 billion.