GameStop’s crypto pivot boosts shares of one-time retail investor favourite

A GameStop store in St. Louis, on May 7, 2020. (Jeff Roberson / AP)

GameStop shares were back in action as the company’s move to hoard bitcoin brought retail investors back to their favourite meme stock.

The video game retailer’s shares rose 11.6 per cent to US$28.35 before the bell on Wednesday after GameStop said it would invest in bitcoin at a time when its primary brick-and-mortar business is struggling to draw customers.

“Retail operations aren’t the reason why GameStop’s shares are flying – they never are. This time it’s about the company’s move into bitcoin,” said Dan Coatsworth, investment analyst at AJ Bell.

GameStop’s update to its investment policy on Tuesday to add bitcoin as a treasury reserve asset mirrors the strategy of exchange operator Strategy, the largest corporate holder of bitcoin.

There was some chatter on social media about the company’s interest in bitcoin after GameStop CEO Ryan Cohen shared a picture with Strategy chairman Michael Saylor on social media platform X last month.

The change in the video game retailer’s investment strategy comes amid U.S. President Donald Trump’s increased focus on digital assets, which has boosted interest in cryptocurrencies.

GameStop’s shares could see increased volatility by being tied to the digital currency, according to Capital.com analyst Daniela Hathorn.

The company is set to add more than US$1 billion to its market value if premarket gains hold, following a nearly 20 per cent drop in its share price so far this year.

More than two months after hitting a six-figure all-time high, bitcoin is now trading at around US$88,000, down nearly a fifth from its January peak.

GameStop’s aggressive cost cuts helped the company more than double its net income to US$131.3 million in the fourth quarter.

The company, which has closed hundreds of stores in a pivot to e-commerce under CEO Ryan Cohen, reported quarterly net sales that fell about 30 per cent to US$1.28 billion.

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Reporting by Arsheeya Bajwa in Bengaluru; Additional reporting by Shashwat Chauhan; Editing by Shounak Dasgupta.