GameStop is eyeing an investment in the largest digital asset, Bitcoin, with the company floating a $5 billion proposal. According to reports, Strive Asset Management CEO Matt Cole sent a letter to the company’s CEO asking him to convert its $5 billion cash reserves into Bitcoin.
According to Cole, his company has the fiduciary responsibility to advocate for maximizing shareholder value, since his company is in charge of the exchange-traded funds (ETFs) that hold the GameStop stock.
“We believe GameStop has an incredible opportunity to transform its financial future by becoming the premier Bitcoin treasury company in the gaming sector,” Matt wrote in his letter. In his argument, holding cash is a losing game, noting that Bitcoin will protect the company’s reserves from inflation and help the company tackle monetary debasement.
According to Cohen, GameStop has reduced operating losses and offset deficits through interest from its cash reserves. “By holding Bitcoin through this worldwide monetary revolution, GameStop can transform its substantial treasury from a slowly shrinking resource into a profit center. The moment is ripe now that new FASB accounting standards recognize unrealized Bitcoin gains as profit,” he added.
GameStop mulls Bitcoin decision amid stock jump
Reports that GameStop is looking into the idea have already started to tell on the company’s stock, with the stock seeing a 20% jump on after-hours trading. A previous report from CNBC on February 14 noted that GameStop is looking into alternative assets, including Bitcoin. However, the report mentioned that the company is yet to make a decision as it continues to check if Bitcoin aligns with its long-term plans.
The letter also discussed how the firm could adopt the BTC strategy, mentioning that it could use convertible bonds and market offerings to raise capital to purchase the asset. The strategy is the same as the one adopted by Strategy, with the model redefining the company’s move. He also talked about companies that have seen their stocks rally after adopting Bitcoin.
“Your stock is uniquely suited to purchasing additional Bitcoin to the benefit of your shareholders given its high trading volume. Continuing to issue new equity through an ATM program can generate capital quickly under favorable market conditions, enabling continued Bitcoin acquisitions,” he said.
“Allocating treasury resources to cryptocurrencies beyond Bitcoin risks diluting shareholder value, as speculative alternatives can undermine GameStop’s financial stability and potentially impair your ability to raise future financing, including the Bitcoin financing strategies outlined below in Section 4,” said Matt Cole in his letter.
According to Cole, “By adopting a treasury strategy centered on adopting the Bitcoin Standard where Bitcoin is your hurdle rate for capital deployment in pursuit of your corporate mission, GameStop can move beyond “meme” sentiment, forging a stable foundation to drive sustainable shareholder value.”