A nearly 30% plunge in two days — how far is $GameStop(GME)$ from completing its transformation from meme stock to Bitcoin platform?
Over just two trading days, GameStop (NYSE: GME) has plunged 27%, becoming one of the worst-performing U.S. stocks in that span. The sharp decline was triggered by its latest earnings report followed closely by news of another convertible debt offering. Why did these announcements lead to such a drastic sell-off? Once the flagship of the meme stock craze and a battlefield for retail investors against Wall Street short-sellers, GameStop has undergone a dramatic strategic transformation in recent years. But how exactly has its investment thesis evolved?
GameStop: From Past to Present
GameStop was originally a traditional video game retailer selling gaming software, hardware, and accessories across thousands of brick-and-mortar stores globally. However, the rise of e-commerce and digital downloads throughout the 2010s led to a prolonged business decline. GameStop stock was heavily shorted by institutional investors and traded at consistently low levels.
That all changed in January 2021, when one of the most dramatic “short squeezes” in financial history occurred. GameStop, being severely shorted, became the frontline of retail investors' fight against hedge funds. Thousands of retail traders rallied on platforms like Reddit and Discord, using zero-commission brokers like Robinhood to buy up shares and call options en masse. Market makers, forced to delta hedge the surging demand for calls, bought large amounts of stock, triggering a “gamma squeeze” that pushed the stock from around $1 to a pre-market peak of $480. The event caused massive losses for short-sellers and captivated global attention.
Following the squeeze, GameStop's price became decoupled from its fundamental value, driven instead by speculative trading and option-driven volatility. In the years since, GameStop has seen multiple repeat episodes of such “mini squeezes.”
Source：Google Finance
At the same time, the company has pivoted significantly in its strategy. It began aggressively closing or divesting underperforming stores globally — a move that shrank revenue but improved profitability. Capitalizing on stock price surges, GameStop issued new shares to raise cash, building a war chest. In March 2025, it announced that Bitcoin would become part of its strategic reserve assets. Many saw this as a move to follow MicroStrategy’s footsteps — transforming into a stock-market proxy for Bitcoin exposure.
Earnings & Convertible Debt: Trigger for the Sell-Off
After markets closed on a Wednesday, GameStop released its Q1 FY2025 results. The company remained focused on divesting non-core operations, with revenue down 17% YoY to $732.4 million, below the expected $750 million. GameStop has been steadily exiting international markets: in 2024, it sold its Italian business, closed operations in Germany, shut 590 U.S. stores, and exited Canada entirely in May 2025. The company also plans to leave France by year-end.
Despite the falling revenue, profitability improved markedly. Adjusted operating income hit $27.5 million (vs. a $32.3 million loss YoY), adjusted net income came in at $83.1 million (vs. a $36.7 million loss YoY), and adjusted EPS was $0.17, beating expectations of $0.08.
Additionally, GameStop disclosed that between May 3 and June 10, it had purchased 4,710 BTC using cash reserves.
Source：GameStop 2025 Q1 Results
The next day, GameStop announced a second major convertible debt issuance: a $1.75 billion zero-coupon convertible bond due in June 2032. This came just after the $1.5 billion bond issued in April (due 2030). The proceeds are intended for Bitcoin-related investments and potential acquisitions. Once completed, the company’s cash position could exceed $8 billion. This back-to-back debt raising surprised markets and reignited fears of significant equity dilution if the bonds convert — echoing the 20%+ plunge seen in March after the first bond was announced.
Source：Google Finance
We believe the market’s reaction was arguably overdone. From a pure dilution perspective, the price drop nearly matched the notional value of the $1.75 billion new issuance. However, given the speculative nature of the stock and the fact that it had previously risen without clear fundamental support, a sharp drawdown is understandable.
$Bitcoin(BTC.USD.CC)$ Strategy and Investment Logic
Since announcing its Bitcoin investment plan, GameStop has started to cultivate a new investment narrative — one no longer solely built on short squeezes. While it may not have completely shed its “meme stock” label, the company is starting to be viewed in terms of retail profitability and the appreciating value of its digital assets — the latter clearly being of greater market interest.
However, GameStop’s Bitcoin strategy remains vague. It’s unclear whether the bulk of its funds will go toward crypto purchases, revitalizing retail operations, or diversifying into other asset classes. After leveraging up, many investors expect GameStop to mimic MicroStrategy (now renamed Strategy), which used debt-financed leverage to accumulate BTC and amplify shareholder returns.
Comparatively, GameStop now carries more debt relative to equity than Strategy. If it follows a similarly aggressive model and concentrates capital in Bitcoin, it could become an even more leveraged proxy for BTC exposure. In that case, the stock’s performance would correlate increasingly with Bitcoin’s price and likely exhibit greater volatility.
Invesight Viewpoint
GameStop is actively building a new investment thesis — one that aims to transition from meme-fueled volatility to a long-leveraged Bitcoin asset play. It could eventually offer investors exposure to Bitcoin with even more torque than Strategy. While the recent sell-off and headline risk may rattle sentiment in the short term, it does not fundamentally damage the long-term narrative — especially for crypto-believing, risk-tolerant capital.
That said, the company’s Bitcoin strategy is still in its infancy, and execution risks remain high. Investors seeking digital asset exposure through GameStop should remain cautious until a clearer allocation roadmap emerges.
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