The video game retailer, which has invested in about 4,170 bitcoins, indicated it could sell some of its digital assets following its latest earnings report.
GameStop Corp. (GME) saw its stock tank by over 5% this week as the value of its bitcoin holdings declined owing to the gloom of the ongoing crypto winter that has wiped 3.3% off the king coin’s value in the same period.
At the end of the third quarter on Nov. 1, the company’s Bitcoin stack was valued at $519.4 million. During the three-month period, the company recorded a $9.2 million loss on its digital asset holdings, after Bitcoin fell from over $122,000 to about $110,000 in the month of October, according to CoinGecko data.
GameStop held onto its 4,710 BTC despite the steep drop in BTC prices, which was the same quantity it purchased between early May and mid-June. The company acquired the tokens using proceeds from a $1.3 billion debt offering announced in March.
If the retailer was to sell its whole stash during Bitcoin’s all-time high peak of about $123,000 per coin, it would have collected a 12% profit from its holdings. But at current prices, the coins have taken a 2.7% slump since May 28.
Bitcoin Investment Performance Impacts GME Stock
When GameStop purchased $512 million worth of Bitcoin in May, its stock was valued at $35, its highest year-to-date price level. It has declined gradually by roughly 30% since then, dropping from $33 to $23.35 ahead of the earnings call.
The third-quarter report revealed the Bitcoin treasury had decreased in value by almost $10 million over three months, although the firm recorded $19.4 million above its initial investment. The company confirmed that it had not bought or sold any Bitcoin during the quarter.
The decline in valuation came on the heels of a 21% drop in Bitcoin from $115,500 to $90,131 in the 90 days according to CoinGecko. The fall was partly caused by the October 10 “max pain” liquidation event in crypto history, which saw $19 billion in positions liquidated in a single day, per data from CoinGlass. Several analysts reduced Bitcoin price targets after the sell off, and it appears the largest coin by market cap is yet to shake off the bearish cloud surrounding near the anticipated “Santa Claus rally.”
Shares of GameStop fell 5.8% on Wednesday, as its Q3 report showed net sales for the period came in at $821 million, down from $860 million a year earlier and below analyst estimates of $987.3 million, a 4.6% year-on-year decline and a 16.8% miss compared with forecasts.
Despite the weaker revenue, the video game company’s net income soared to $77.1 million, up from $17.4 million in the same quarter last year. Adjusted earnings per share were $0.24, exceeding analyst expectations of $0.20, a 20% beat, and EBITDA reached $64.4 million, a remarkable 675% growth from the prior year.
Operating margin improved to 5% from a negative 2.9%, while free cash flow margin rose to 13%, compared with 2.3% a year earlier. The company’s market capitalization currently stands at $10.46 billion.
Corporate Bitcoin Treasuries Suffer from Crypto Winter Chills
GameStop was not the only Bitcoin treasury that suffered steep losses when Bitcoin tanked from its “Uptober” highs, as many of them are now reporting substantial unrealized losses.
Companies that raised capital to acquire Bitcoin over $100,000 hoping the asset would stay above six figures and even grow exponentially in December, are now facing losses and declining equity premiums.
Metaplanet, the second largest publicly listed Bitcoin treasury company, swung from over $600 million in unrealized gains in early October to around $530 million in unrealized losses as of Dec. 1, according to Galaxy Research.
However, BTC’s rebound from the $82,000 bottom in late November helped Metaplanet’s mNAV ratio to climb to 1.17, its highest level since the October 10 crisis, according to the company’s dashboard. The Bitcoin DAT’s stock price was trading 10.83% down after the Japanese market’s Thursday session closed.