The company's business model relies on physical video games and reselling of used games, which have been impacted by the decline of physical media in gaming.
Bitcoin News
GameStop reported third-quarter revenue of $821 million, falling short of analyst expectations of $987.29 million, as declining core sales and reduced Bitcoin gains pressured earnings. Shares dropped over 4% on Wednesday following the announcement.
The company holds 4,710 Bitcoin with unrealized losses during the quarter totaling $9 million, though its position remains up $19.4 million for the year, according to the Q3 report filed with the SEC. The results continue a pattern of missed expectations, with its Q1 revenue of approximately $732 million also falling short of estimates of $754 million.
GameStop adopted a Bitcoin treasury strategy in March, briefly lifting the stock by about 12% to $35 per share, but those gains quickly reversed. The company's business model relies on physical video games and reselling of used games, which have been impacted by the decline of physical media in gaming.
The company raised $1.5 billion in April to finance Bitcoin purchases and bought 4,710 Bitcoin in May as part of its strategic pivot to a digital asset treasury company. GameStop shares slid by 11% the day after announcing the treasury pivot, as investors voiced concerns over the digital asset strategy.
CEO Ryan Cohen stated in July that crypto and Bitcoin are hedges against inflation, teasing plans to accept crypto as payment at stores. Cohen said the ability to use crypto within transactions is an opportunity the company is exploring.
He added that GameStop is attempting to reduce reliance on physical hardware and game sales due to rising costs, with a focus shifting toward collectibles like trading cards. The strategic repositioning comes as the company navigates the transition away from its traditional retail model.
The decline of GameStop's stock is part of a broader downturn in digital asset treasury companies, attributed to market saturation and investor caution, according to Standard Chartered. Multiple companies that adopted similar strategies have seen their stock premiums collapse in recent months.
GameStop's stock has been in decline since its crypto treasury move in March, with shares continuing to retrace despite brief rallies. The company's quarterly performance suggests the Bitcoin treasury strategy has provided little relief from underlying business challenges in its core retail operations.
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