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By Arsheeya Bajwa
(Reuters) -GameStop shares were back in action as the company's move to hoard bitcoin brought retail investors back to their favorite meme stock.
The video game retailer's shares rose 11.6% to $28.36 on Wednesday after GameStop said it would invest in bitcoin at a time when its primary brick-and-mortar business is struggling to draw customers.
The company's shares, however, dropped 5.5% in post market trade after announcing an offering of $1.3 billion 5-year convertible notes to fund the bitcoin purchase.
"The company clearly understands its shareholder base," said Michael Pachter, managing director at Wedbush. "They (investors) want GameStop to take their money and invest in things like bitcoin, and the company is accommodating their wishes."
GameStop was the seventh most traded stock by U.S. retail investors at 10 a.m. ET, according to J.P.Morgan data.
The company's change to its investment policy on Tuesday to add bitcoin as a treasury reserve asset mirrors exchange operator Strategy, the largest corporate holder of bitcoin.
There was some chatter on social media about the company's interest in bitcoin after GameStop CEO Ryan Cohen shared a picture with Strategy chairman Michael Saylor on social media platform X last month.
The update to the video game retailer's investment plans comes at a time when U.S. President Donald Trump has increased focus on digital assets, which has boosted interest in cryptocurrencies.
CRYPTO BOOST UNSUSTAINABLE
It is hard to see how the investment in bitcoin will drive GameStop's shares materially higher, Wedbush's Pachter said.
While exchange operator Strategy trades at around twice the value of its bitcoin assets, GameStop shares trade at more than two-and-a-half times the value of its cash, Pachter added.
GameStop had $4.77 billion in cash as of February 3, according to an annual filing by the company.
More than two months after hitting a six-figure all-time high, bitcoin is now trading at around $88,000, down nearly a fifth from its January peak.
GameStop's shares could see increased volatility by being tied to the digital currency, according to Capital.com analyst Daniela Hathorn.
The video game retailer's aggressive cost cuts, which included shutting hundreds of stores, helped the company more than double its net income to $131.3 million in the fourth quarter. Sales fell about 30% to $1.28 billion.
(Reporting by Arsheeya Bajwa in Bengaluru; Additional reporting by Shashwat Chauhan and Medha Singh and Chibuike Oguh; Editing by Shounak Dasgupta and Stephen Coates)
