GameStop's Bold Move: Adding Bitcoin to Its Treasury Amid Struggling Sales

GameStop Corp. (GME), the video-game retailer that captured headlines during the meme stock mania of 2021, announced that its board has approved a policy to add Bitcoin as a treasury reserve asset.

The decision, revealed alongside the company’s fourth-quarter earnings report, triggered a 14% surge in GameStop shares on Wednesday.

While GameStop’s financial results showed ongoing challenges, including a 28% drop in revenue year-over-year to $1.28 billion, the company’s leadership is turning to Bitcoin in a bid to diversify its financial strategy. Adjusted earnings per share came in at $0.30, beating analyst expectations by $0.22, though sales still lagged estimates.

Following the MicroStrategy Model
The decision to adopt Bitcoin echoes the playbook of MicroStrategy Inc. (MSTR), which made headlines for accumulating over $40 billion in Bitcoin. CEO Ryan Cohen had teased the move last month by posting a photo with MicroStrategy Executive Chairman Michael Saylor, a vocal Bitcoin advocate. GameStop’s decision aligns with the belief that holding Bitcoin could provide a hedge against inflation and offer long-term value.

While GameStop has not disclosed specific details on the amount or timeline for its Bitcoin purchases, the announcement places the retailer among a growing number of companies adding cryptocurrency to their corporate reserves.

A Struggling Core Business
Despite the excitement surrounding the Bitcoin decision, GameStop’s financial health remains a concern. The company reported adjusted EBITDA of $96.5 million for the quarter, a slight increase from $88 million the previous year. However, hardware, accessories, and software sales declined, with only the collectibles segment showing growth.

GameStop’s continued cost-cutting measures include store closures, with 590 locations shuttered in the past fiscal year. The retailer also completed its exit from the Italian market and reduced its presence in Germany. Analysts remain skeptical about GameStop’s long-term profitability, with limited buy ratings and ongoing questions about the sustainability of its business model.

Market Reaction and Future Outlook
GameStop’s stock has climbed around 80% in the past year, fueled by retail investor interest and speculation. The move to hold Bitcoin may further attract crypto-enthusiast investors, adding volatility to its stock price. However, critics argue that without a clear turnaround in its core operations, GameStop’s financial future remains uncertain.

As the company embarks on this new chapter, investors will closely watch how GameStop navigates the volatile crypto market while attempting to stabilize its traditional business. The success or failure of its Bitcoin strategy could determine the retailer’s fate in the years ahead.

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