Why GameStop Sold Crypto Before Its Latest Bitcoin Bet

GameStop’s announcement on Wednesday that it would sell convertible debt to buy Bitcoin and bolster its balance sheet seems contrary to its past approach to digital assets.

In recent years, the video game retailer debuted an ill-fated NFT platform and sold large quantities of IMX, the native token of Ethereum layer-2 network Immutable X. 

GameStop now appears to be following the path of Bitcoin hodler Strategy, saying it will offer $1.3 billion worth of convertible senior notes and potentially use proceeds to start stockpiling the largest cryptocurrency by market value.

Strategy, which began acquiring Bitcoin in 2020, now holds more than 500,000 Bitcoin worth around $44 billion. In recent years, as it has pivoted its focus from software to becoming a Bitcoin treasury, Strategy has issued billions of dollars of convertible senior notes.

Convertible debt has allowed Strategy to raise capital to purchase more Bitcoin than it could otherwise. The Tysons Corner, Virginia-based company unveiled its latest offering of convertible debt in February, raising $2 billion via convertible notes maturing in March 2030.

To be clear, GameStop has not purchased a single satoshi worth of Bitcoin yet. GameStop’s approach to crypto has been more transactional, at least until now.  

It started initially with Ethereum years ago, launching an NFT marketplace in July 2022, which initially lived on the Ethereum layer-2 scaling network Loopring. At the time, GameStop had grand visions of cornering the NFT space, specifically for gaming, but the brick-and-mortar retailer started shuttering the platform less than two years later.

When GameStop axed its NFT marketplace last January, the company cited “continuing regulatory uncertainty” around digital assets. It vocalized similar concerns when scrapping plans for an NFT-centric digital wallet, part of a complete departure from the crypto space.

In 2022 and 2023, as the company cut ties with crypto, it generated $85 million in proceeds from selling digital assets, according to a Securities and Exchange Commission filing. Revenues from GameStop’s NFT marketplace and wallet were “not material,” the company added.

A cryptocurrency called IMX tanked 23% when GameStop sold $47 million worth of the token on the open market in February 2022. GameStop got the funds as part of a contractual agreement with the crypto gaming startup Immutable, which helped launch Immutable X.

GameStop sold its IMX holdings before launching a crypto product. It later expanded its NFT marketplace to support digital collectibles on Immutable X, while also establishing a $100 million fund to incentivize game developers to launch NFTs on its platform through IMX token grants.

IMX’s price peaked around $9.50 over three years ago, according to the crypto market provider CoinGecko. It was recently changing hands around $0.64 on Thursday.

GameStop’s NFT endeavors were guided by former CEO Matt Furlong. He was terminated in July 2023, with Ryan Cohen, the company’s chair, assuming his role. 

Cohen recently seemed to foreshadow GameStop’s Bitcoin pivot. Last month, he posted a photo to X, formerly Twitter, of him standing shoulder-to-shoulder with Strategy co-founder and Executive Chairman Michael Saylor, who ranks among Bitcoin’s top evangelists.

Still, GameStop has said it “may sell any Bitcoin we may acquire.”

Edited by James Rubin