GameStop, the video game and electronics retailer, has received a bold proposal from Strive Asset Management to convert its substantial cash reserves into Bitcoin. The proposal, detailed in a letter sent to GameStop CEO Ryan Cohen on February 24, suggests transforming the company into "the premier Bitcoin treasury company in the gaming sector."
Matt Cole, CEO of Strive Asset Management, which holds GameStop stock through its ETFs, argues that holding cash is becoming increasingly disadvantageous due to inflation. The proposal recommends GameStop redirect its approximately $5 billion cash reserve toward Bitcoin investments.
The timing appears strategic, as GameStop has successfully reduced operating losses and maintained profitability through interest income from its cash holdings. New FASB accounting standards now recognize unrealized Bitcoin gains as profit, potentially making the transition more attractive from a financial reporting perspective.
The market has already shown enthusiasm for the possibility, with GameStop shares jumping 20% in after-hours trading following reports of the company considering cryptocurrency investments. While GameStop is actively evaluating alternative assets, including Bitcoin, no final decision has been announced.
The proposed implementation strategy includes raising capital through at-the-market offerings and convertible debt securities specifically for Bitcoin purchases. This approach mirrors the successful Bitcoin acquisition strategy employed by Strategy (formerly MicroStrategy).
GameStop's previous venture into cryptocurrency included a digital asset and NFT wallet launched in 2022, though this service was discontinued in 2023 due to regulatory concerns. Under Cohen's leadership, the company has focused on cost-cutting and operational streamlining.
Strive's proposal specifically advocates for an exclusive focus on Bitcoin, avoiding other cryptocurrencies. The asset management firm argues that Bitcoin's unique characteristics as a store of value make it the optimal choice for protecting shareholder interests.
The proposal comes at a time when GameStop faces ongoing challenges in its traditional brick-and-mortar business model, as consumers increasingly prefer digital game downloads. A move into Bitcoin could represent a strategic pivot for the company, potentially transforming its identity from a meme stock phenomenon to a serious player in the digital asset space.
GameStop's cash reserves stood at $4.6 billion as of November 2023, according to recent securities filings. While the company is reportedly considering the proposal, it has not yet made any public statements regarding its decision.