GameStop Stock Is Facing Selling Pressure Thursday: What's Going On?

Shares of GameStop Corp GME are falling Thursday after the company announced plans for a private offering.

What To Know: GameStop said it intends to offer $1.75 billion of 0.00% Convertible Senior Notes due 2032 to institutional buyers. The company also plans to grant the initial purchasers a 13-day window to buy up to an additional $250 million of the notes.

GameStop expects to use the net proceeds to make investments aligned with its investment policy, as well as for potential acquisitions. GameStop recently announced that its board unanimously approved an update to its investment strategy to add Bitcoin as a treasury reserve asset.

The proposed private offering comes on the heels of the company’s first-quarter results. GameStop reported mixed results for the first quarter with revenue of $732.4 million, below analyst estimates of $754.24 million, and adjusted earnings per share coming in at 17 cents, above estimates of four cents.

The company ended the quarter with approximately $6.4 billion in cash, cash equivalents, and marketable securities, but disclosed that it used cash to purchase 4,710 Bitcoin after the quarter closed.

Wedbush analyst Michael Pachter reiterated coverage on GameStop with an Underperform rating and price target of $13.50 earlier this week. The analyst expects to see continued declines in the company's core business, and noted that the company’s Bitcoin strategy won’t be enough to turn things around.

“It is difficult to understand why any investor would be willing to pay more than 2x cash value for the possibility of GameStop converting more of its cash into Bitcoin, especially since these investors could invest in Bitcoin or a Bitcoin ETF themselves,” Pachter said.

GME Price Action:  GameStop shares were down 19% at $23.14 at the time of publication Thursday, according to Benzinga Pro. 

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