Wedbush expects GameStop’s offering to ‘fall flat’

Wedbush notes that Underperform-rated GameStop (GME) announced a proposed private offering of $1.3B of 0.00% convertible notes due 2030. GameStop will be using the net proceeds from the offering for general corporate purposes, including the purchase of Bitcoin. The company intends to let its stock float until pricing. Investors purchasing the bonds will be paying a large premium to GameStop’s assets, the firm notes. Wedbush believes GameStop is following the MicroStrategy (MSTR) playbook, but MicroStrategy currently trades at less than 2-turns the value of its Bitcoin holdings. Wedbush is uncertain whether there will be much uptake on the offering as the company may get caught up by the “qualified” investor requirement. The firm finds it “hard to understand why any investor would be pay more than 2x cash value for the potential for GameStop to convert that cash into Bitcoin.” That said, despite a complete lack of articulated strategy, “GameStop has consistently been able to capitalize on the existence of ‘greater fool’ willing to pay more than twice its asset value for its shares-and so far, they’ve been right,” says Wedbush. The firm expects the offering to fall flat.