GameStop Stock Takes Big Hit After Controversial Announcement

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Summary

  • GameStop’s stock dropped 10% after the company announced a $500 million Bitcoin purchase that depleted around 10% of its cash reserves.
  • GameStop’s core business has been on a steady decline since the start of the digital age, which saw a large drop in physical game sales.
  • Investors appear skeptical about the cryptocurrency pivot doing anything to address GameStop’s fundamental issues.

After GameStop revealed in late May 2025 that they had bought over $500 million worth of Bitcoin, their stock price dropped more than 10%. Many investors seem unhappy with this shift towards cryptocurrency, as they believe the move does not help resolve the issues GameStop is currently dealing with. Some argue it even exacerbates them without addressing the primary or secondary problems facing the company.

Since the emergence of the digital age, GameStop’s traditional business model centered on physical game sales has been struggling. Consumers have increasingly shifted their spending towards digital content, affecting GameStop negatively. However, in January 2021, a market rally unexpectedly boosted the company due to what is known as a short squeeze—a sudden price surge caused by a large number of investors who had bet against the company scrambling to buy shares to limit their losses. This episode catapulted GameStop into meme stock status, but its underlying financial health has shown little improvement since then.

The retailer made a move to expand its investment portfolio by buying approximately 4,710 Bitcoins, a transaction they revealed on May 28th. Although they didn’t specify the exact timing, this announcement came a week after Bitcoin had hit an unprecedented high of $111,000. If the entire purchase occurred during the final week of May 2025, it would have cost the retailer over $500 million. Immediately after announcing its acquisition of Bitcoin, GameStop’s stock price plummeted to $30.88 – a decrease of 13.7%. The following day, the stock continued to fall, ending at $29.56.

Investors Have Been Skeptical of GameStop’s Bitcoin Bet for a While Now

Back in late March 2025, the public’s skepticism towards cryptocurrency was already hinted at when GameStop’s stock dropped after announcing plans to invest heavily in Bitcoin. Although the share price has bounced back since then, it seems that the investors’ viewpoint on this matter remains unchanged, as indicated by their negative reaction to recent moves towards cryptocurrencies.

Why Are Public Markets Reacting Negatively to GameStop’s Bitcoin Purchase?

Critics question the validity of the troubled retailer’s cryptocurrency investment for several reasons. One major concern is that this move fails to tackle the primary problem the company is grappling with – the disintegration of its traditional business model. With fewer physical game sales taking place, GameStop’s long-term viability is at risk. Investing in Bitcoin does nothing to resolve this issue.

The main point is about the strategy being questioned: GameStop, as a publicly traded company, is generally viewed as a platform for stock investment, not a stand-in for speculative assets. When it puts around 10.5% of its cash reserves into Bitcoin, it blends its corporate image with a volatile commodity, potentially adding unwanted risk to shareholders who might not have agreed to such exposure. Essentially, anyone who supports Bitcoin can simply buy it instead of overpaying for a faltering video game retailer to make the same investment on their behalf.

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2025-05-30 01:12