Key facts
- GameStop renewed its Bitcoin options deal with Coinbase.
- The pledged Bitcoin is no longer a direct holding and is valued below its cost.
- The strategy contributed approximately $1 million to earnings.
- GameStop posted a record net income of about $390 million for the quarter.
- The strike price for the renewed contracts is $80,000.
Video game retailer GameStop has renewed an arrangement with cryptocurrency exchange Coinbase that ties up nearly all of its Bitcoin holdings in options contracts. This strategy, which allows GameStop to receive upfront cash in exchange for potentially forfeiting price gains, was detailed in a quarterly filing with the Securities and Exchange Commission.
Under the renewed terms, the pledged Bitcoin no longer counts as a direct holding and is recorded as a claim for repayment. This claim is valued at $369.6 million, approximately $58 million below the cost of the coins. The sale of the options brought in $5.8 million over the period. The strike price for the renewed contracts has been set at $80,000, a decrease from the previous range of $105,000 to $110,000. Options tied to the earlier, higher strike prices expired worthless on May 29.
GameStop began acquiring Bitcoin in March of the previous year, borrowing $1.5 billion to invest in the cryptocurrency. This strategy effectively turned part of its balance sheet into a bet on Bitcoin's price appreciation. Earlier in March, the company moved all but one of its 4,710 Bitcoin into this strategy. Accounting rules required GameStop to remove the Bitcoin from its books and record a repayment claim instead.
Despite this arrangement, GameStop's Bitcoin holdings contributed only about $1 million to its earnings for the quarter, listed as a gain on digital assets. This minimal contribution occurred during a period when the company reported a record net income of approximately $390 million. The majority of this profit was attributed to interest earned on its cash reserves and a paper gain on its eBay options position, with its core retail business contributing a smaller portion.