GME stock On Tuesday, GameStop (GME) announced its decision to allocate part of its corporate funds to Bitcoin. GameStop’s shares shot up more than 6% in after-hours trading thanks to the technique, which was reminiscent of MicroStrategy’s Bitcoin purchases.
What Makes GameStop Purchase Bitcoin?
The video game retailer will use some of its $4.8 billion cash reserves to buy Bitcoin and U.S. dollar-pegged stablecoins. The move comes as part of CEO Ryan Cohen’s ongoing efforts to modernize the struggling retailer and increase profitability.
GameStop stated it hasn’t placed a limit on how much Bitcoin it may purchase. The company acknowledged the inherent risks of cryptocurrency volatility but said it believes the strategy could enhance shareholder value over time
Following MicroStrategy’s Path
The decision mirrors MicroStrategy’s Bitcoin news over the past few years. MicroStrategy has bought billions in Bitcoin, making it the largest corporate holder of the cryptocurrency. Despite the risks, its stock has experienced significant growth.
However, GameStop remains cautious. In its SEC filing, the company admitted:
“Our Bitcoin strategy has not been tested and may prove unsuccessful.”
GME Stock Reacts to Bitcoin News
Following the announcement, GME stock jumped 6% in extended trading. GameStop’s fourth-quarter profits, which showed a net income of $131.3 million, more than double the previous year’s earnings, were also well received by investors.
Will Other Businesses Do the Same?
Although GameStop’s move is daring, it is unclear how other retailers would react.With Bitcoin trading at about $88,000, down 18% from its peak, volatility is still a worry for businesses venturing into the cryptocurrency market.
Investors are currently keeping a careful eye on GameStop’s shares to determine how well their Bitcoin risk is working out.
Source: CNBC
