Vivek Ramaswamy's Firm Urges GameStop to Invest in Bitcoin

GameStop, the video game retailer that gained fame during the 2020-2021 meme stock craze, is now being urged by Vivek Ramaswamy's investment firm, Strive Asset Management, to invest in Bitcoin. Strive CEO Matt Cole sent a letter to GameStop CEO Ryan Cohen on February 24, proposing that the company use its $4.6 billion cash reserves to purchase Bitcoin, a move that could transform GameStop from a "meme stock" to a gaming-sector leader.

Cole argues that Bitcoin will become the new "hurdle rate" for capital deployment, suggesting that cash provides negative real returns while Bitcoin serves as an inflation hedge. He recommends that GameStop focus exclusively on Bitcoin while avoiding other crypto assets and leverage capital markets through at-the-market offerings and convertible debt securities.
Strive Asset Management, co-founded by Vivek Ramaswamy, recently launched the Strive Bitcoin Bond ETF, an investment product designed to provide investors with exposure to Bitcoin through convertible securities, mainly associated with MicroStrategy's holdings. The ETF will invest primarily in Bitcoin bonds and other derivatives such as swaps and options, focusing on direct and derivative positions in Bitcoin-linked securities. It will also hold cash in US Treasury securities and potentially invest in other Bitcoin-focused financial instruments.
GameStop is not the first company to consider investing in Bitcoin. Tesla, the electric vehicle manufacturer, invested $1.5 billion in Bitcoin in February 2021, and MicroStrategy, a business intelligence software company, has purchased over $4 billion worth of Bitcoin.

GameStop's exploration of crypto investments comes as the company faces declining sales, with a 20% drop reported in Q3 2024 across both hardware and software segments. The company's traditional brick-and-mortar business continues to face challenges as digital game downloads gain popularity.
The reaction from GameStop shareholders to this potential move remains to be seen. While some investors might welcome the Bitcoin strategy as forward-thinking, others might question the company's commitment to long-term shareholder value.

In conclusion, Strive Asset Management's proposal for GameStop to invest in Bitcoin presents an intriguing opportunity for the video game retailer. By embracing Bitcoin, GameStop could potentially enhance its reputation as a forward-thinking and innovative company in the gaming industry, attract more customers and investors, and generate significant returns for its shareholders. However, the company must carefully evaluate the risks and challenges associated with this move, including market volatility, regulatory risks, liquidity risks, operational challenges, reputation risks, and potential resistance from shareholders. As GameStop considers its next steps, it must weigh the potential benefits and drawbacks of this strategic shift in its investment portfolio.