GameStop stock price falls over 25%: The carnival and disillusionment amidst the Bitcoin craze

Written by: Luke, Mars Finance

On March 27, 2025, GameStop (stock code: $GME) staged a jaw-dropping drama: it first surged 14% after announcing it would purchase Bitcoin through debt financing, only to plummet more than 25% within a day, erasing all gains from the previous two days.

This game retailer, once famous for its “meme stocks,” has once again ignited investors’ adrenaline with a rollercoaster market. However, why is the plot so ups and downs this time? Is it the bursting of retail investors’ frenzied bubble, or the market’s calm judgment on the new strategy? Let us peel back this “Bitcoin candy-coated bomb” to find out.

Act One: The Temptation of Bitcoin, the Frenzy of Retail Investors

On March 25, the GameStop board dropped a bombshell: the company will invest part of its cash and future debt and equity financing into Bitcoin. This news was like a signal flare, instantly igniting the enthusiasm of retail investors. In after-hours trading that day, the $GME stock price rose over 6%, and the next day (March 26) it briefly soared 14% in pre-market trading, closing up 11.65% at $28.36. On social media, the WallStreetBets ‘apes’ gathered again, flooding posts: “GME is going to become the Bitcoin king!”, “The next MicroStrategy is coming!”

This frenzy is not without reason. Bitcoin, known as “digital gold,” has been seen in recent years as the ultimate weapon against inflation. MicroStrategy (now known as Strategy) has skyrocketed its stock price by hoarding 500,000 bitcoins (worth over $40 billion), rising dozens of times from its low in 2020, becoming a myth in the eyes of retail and institutional investors. GameStop’s move is clearly mimicking this script. Moreover, the company has just announced that its net income for the fourth quarter of fiscal year 2024 doubled to $131.3 million, with $4 billion in cash reserves, undoubtedly adding some confidence to the “Bitcoin dream.”

For retail investors, this is not only a financial adventure, but also an emotional carnival. GameStop is no longer just a game retailer, but a symbol of the fight against Wall Street in 2021. Now, it seems that it is going to take advantage of the east wind of Bitcoin to stage the drama of “Dick Silk Counterattack” again. Investors are fantasizing: if bitcoin returns to $100,000, will $GME skyrocket? This speculative psychology pushes up the stock price and allows the market to ignore the potential risks for the time being.

Act Two: The Truth About 1.3 Billion in Debt, Cold Water After the Frenzy

However, the good show has just begun, and the plot took a sharp turn. On March 27, the U.S. Securities and Exchange Commission (SEC) disclosed the financing details of GameStop: the company plans to issue $1.3 billion in zero-coupon convertible senior notes, maturing in 2030, to purchase Bitcoin. This news was like a bucket of cold water poured on the enthusiastic retail investors, causing the stock price to plummet from its highs, with a drop of over 25% on the day, and the market value evaporating by billions of dollars.

Why is the market reacting so violently? These $1.3 billion bonds are like a candy hiding a time bomb, sweet on the outside but concealing a crisis inside. First of all, these bonds are “convertible”, meaning they may be turned into stock in the future. According to Wedbush analyst Michael Pachter’s estimates, this bond issuance will result in the additional issuance of about 46 million shares, while GameStop’s current outstanding shares are 447 million, which means that existing shareholders’ equity will be diluted by more than 10%. For a company with a market value of $12.7 billion, this dilution is like stabbing a needle into a stock price bubble.

Secondly, the “zero-coupon” design of these bonds raises concerns among investors. Zero-coupon means that GameStop does not have to pay interest, but the returns for bondholders rely entirely on the price appreciation of Bitcoin. If Bitcoin performs poorly, investors may face the risk of losing all their capital. Worse still, GameStop’s traditional retail business continues to shrink - closing 590 stores in the U.S. in fiscal year 2024, with more closures expected in fiscal year 2025. The market is starting to doubt: Does this company really have the ability to turn around with Bitcoin, or is it just “drinking poison to quench thirst”?

Retail investors’ sentiment quickly shifted from “to the moon” to “once again being cut like leeks.” On platform X, someone joked, “Is GME going to buy a coffin with Bitcoin?” Furthermore, analysts pointed out that the market value of $12.7 billion far exceeds the potential value of its $4 billion cash plus $1.3 billion Bitcoin investment, making this high valuation seem precarious after the financing details were revealed.

Act Three: The Shadow of MicroStrategy, the Shortcomings of GME

GameStop’s Bitcoin plan is clearly inspired by MicroStrategy, but the gap between the two is like a comparison between a marathon and a sprint. MicroStrategy has created a “Bitcoin ATM” through diversified financing methods (stock issuance, convertible bonds, ATM mechanisms): selling stocks at a high premium to buy coins, then pushing up stock prices as Bitcoin rises, forming a capital closed loop. Founder Michael Saylor even made a vow of “never selling coins,” transforming the company into a “digital asset pioneer” and attracting institutional investors globally.

GameStop, on the other hand, has more of a Bitcoin strategy than a hasty parody show. The inflexibility of the $1.3 billion single bond issuance program directly exposes the risk of equity dilution, while MicroStrategy has a longer debt maturity (maturing as early as 2028) to withstand market volatility. What’s more, MicroStrategy has completely transformed into a Bitcoin company, and its software business is just an embellishment; GameStop’s core is still retail, and the wave of store closures in FY2025 shows that its fundamentals have not improved. Retail investors may be expecting $GME to replicate the miracle of MSTR, but the market is clearly not buying it: one is the far-sighted “capital alchemy” and the other is the “meme speculation” of the stragglers.

The Bitcoin market environment could also be the last straw that crushes $GME. If the price of Bitcoin weakens after the announcement (real-time data verification is required), investors’ confidence in GameStop will be further shaken. In contrast, MicroStrategy’s holding of 500,000 BTC is enough to influence market expectations, while the $1.3 billion investment in $GME is just a drop in the ocean and difficult to make waves.

Act Four: Herd Mentality and Market Judgment

As a representative of “meme stocks,” the price of $GME has never been a rational product but rather an amplifier of retail investor sentiment. The rise on March 25 was a typical example of herd behavior: the Bitcoin craze combined with positive earnings news attracted a rush of retail investors, driving up the stock price. However, when the details of the $1.3 billion bond issuance surfaced, profit-takers quickly exited, leading to panic selling. This “buy high, sell low” speculative model is the biggest difference between $GME and MSTR—while the latter stabilizes its position with institutional backing and long-term strategies, the former swings between the frenzy and disillusionment of retail investors.

Market analysts hit the nail on the head: “GameStop wants to learn from MicroStrategy, but forgets that it is a meme stock. Retail investors can hype concepts, but won’t pay for dilution and high valuations.” Moreover, some comments jokingly said: “$GME is using Bitcoin as a lifeline, only to find that the straw underneath is an abyss.”

Epilogue: The celebration has come to an end, but the lessons remain.

The initial rise and subsequent fall of GameStop’s stock price is not only a reflection of the Bitcoin craze but also a clash between retail speculation and market rationality. The initial 14% increase was driven by the fantasy of a “Bitcoin transformation,” with retail investors viewing it as a new weapon against Wall Street; however, the following 25% plunge served as a wake-up call to reality—risks of debt dilution amounting to $1.3 billion, unsustainable high valuations, and the hollowing out of core business led to the rapid end of this frenzy.

This play tells us: Bitcoin may be the gold mine of the future, but not every company can strike gold. MicroStrategy took five years to prove the feasibility of “capital + Bitcoin,” while GameStop’s hasty entry seems more like a gamble. In the future, if $GME cannot improve its financing strategy and reverse the retail decline, its Bitcoin dream may just be a fleeting moment. For investors, this is not only a roller coaster of stock prices, but also a vivid lesson in risk education: between memes and reality, the market is always the final arbiter.