Bitcoin's fall causes GameStop stock to stall

GameStop is going through a zone of turbulence after having bet massively on Bitcoin. The video game retailer saw its cryptocurrency holdings fall by $9.2 million in three months, sending its stock down more than 5%. Faced with this disappointment, the company is now considering liquidating part of its digital assets.

A risky bet that turns into a nightmare

GameStop bet big last spring. Between May and June, the retailer acquired 4,710 bitcoins for $512 million, financed by a $1.3 billion bond issue.

At the time, GameStop's stock was peaking at $35 and bitcoin seemed unstoppable. Six months later, the picture is seriously darkening.

As of November 1, the company's bitcoin holdings had a valuation of $519.4 million. An amount which still represents a gain of 19.4 million compared to the initial investment.

However, the trajectory is worrying. During the third quarter alone, the company suffered an unrealized loss of $9.2 million. Bitcoin fell from over $122,000 to around $110,000 in October before plunging as low as $90,000 in mid-December.

If GameStop had sold at the all-time high of $123,000, it would have made a 12% profit. Today, bitcoin is down 2.7% since the initial purchase on May 28.

The company finds itself trapped in an uncomfortable position : hold on and hope for a rebound, or sell at a loss to limit the bleeding. In its latest financial report, GameStop suggested that it could opt for the second solution.

GME stock reflects this uncertainty. From $35 in May, it tumbled 30% to $23.35 just before the results were published. The fall even accelerated on Wednesday with a decline of an additional 5.8%. Investors are clearly sanctioning the company's Bitcoin strategy.

Contrasting results in a freezing crypto market

THE third quarter report reveals a mixed picture. Net sales stood at $821 million, far from the $987 million expected by analysts. This is 4.6% less than a year ago and a difference of 16.8% compared to forecasts. The turnover disappoints, but other indicators give some hope.

Net profit jumped to $77.1 million, up from just $17.4 million a year earlier. EBITDA literally exploded with growth of 675%, reaching $64.4 million.

The operating margin moved into positive territory at 5%, compared to -2.9% the previous year. This operational performance demonstrates that GameStop is improving its efficiency, even if sales are stagnating.

But this good news struggles to offset the concern around bitcoin. GameStop is not the only company affected by the “crypto winter”. Companies that have built Bitcoin treasuries are all experiencing the same storm.

Metaplanet, the second largest publicly traded Bitcoin treasury, went from 600 million in unrealized gains in early October to 530 million in losses as of December 1, according to Galaxy Research.

This cold spell follows the massive liquidation of October 10, described as “maximum pain” in crypto history. In a single day, $19 billion in positions were liquidated. Bitcoin lost 21% in 90 days, falling from $115,500 to $90,131.

The uncertain future of corporate Bitcoin treasuries

GameStop now finds itself at a crossroads. Liquidating your bitcoins now would crystallize losses, but would help secure cash flow. Holding on could pay off if bitcoin rebounds during the traditional end-of-year rally. A risky bet in a market that remains bearish.

With a market capitalization of $10.46 billion, GameStop will have to quickly decide the fate of its bitcoins. The video game retailer now embodies the risks of crypto betting: between promises of profits and ruthless volatility, the balance remains precarious. Investors watch every move closely.