GameStop said certain noteholders would exchange about $400 million in notes due 2030 and $1 billion in notes due 2032 for Class A shares of the company.

  • GameStop will not receive any cash proceeds from the transaction with noteholders.
  • Once the notes are exchanged, the company’s outstanding long-term debt will be reduced by $1.4 billion without using cash.
  • The notes exchange announcement comes amid GameStop’s ongoing pursuit of eBay.

Shares of videogame retailer GameStop (GME) fell sharply on Monday after the company said it has agreed to exchange about $1.4 billion of its outstanding convertible senior notes for shares of its Class A common stock in a private transaction. This move will significantly reduce its long-term debt but also increase its outstanding share count.

As of the writing, GME stock was down more than 11% and the top trending ticker on Stocktwits.

What GME’s Notes Exchange Means 

The company said certain noteholders would exchange about $400 million in notes due 2030 and $1 billion in notes due 2032, which were previously offered. GameStop will not receive any cash proceeds from the issuance to noteholders.

Through convertible note offerings, companies gain quick access to capital at low interest rates, and investors have the option to convert their notes into equity down the line, potentially benefiting noteholders if the stock price shoots up. Senior noteholders are prioritized in the event of bankruptcy and paid back first.

Once the notes are exchanged, the company’s outstanding long-term debt will be reduced by $1.4 billion without using cash. The exchange is expected to close on or about September 23, following which, about $1.1 billion in notes due 2030 and $1.7 billion in notes due 2032 will remain outstanding. 

“These activities could increase or decrease the market price of the common stock or the exchange notes, the effect of which may be material,” the company said in a statement.

GME Still Eyeing EBAY

The notes exchange announcement comes amid GameStop’s ongoing pursuit of ecommerce and secondary marketplace giant eBay (EBAY), which started in May.

Most recently, CEO Ryan Cohen agreed to forgo his pay package plan for up to $35 billion, citing a desire to focus on his eBay takeover bid, per a CNBC report. eBay has rejected the initial $56 billion takeover offer, calling the deal “neither credible nor attractive.”

As of the latest SEC filing from July, GameStop now owns a 9.8% stake in eBay, or 43.4 million outstanding shares.

What Retail Traders Think About GME 

On Stocktwits, the retail sentiment toward the stock turned ‘neutral’ from ‘bearish’ over the last 24 hours.

One user on the platform called the pullback in shares a classic overreaction.

View this Stocktwits post

Another user pointed out that while the exchange reduces debt, it creates shareholder dilution.

View this Stocktwits post

GME stock is up more than 8% so far this year, underperforming the S&P 500.

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