By Martin Baccardax

GameStop CEO Ryan Cohen has made strides by shifting the videogame company toward collectibles. Now, he is offering investors something that might be more valuable than old memorabilia.

Shares in the videogame company have fallen nearly 15% since the autumn of 2022, against a 60% gain for the S&P 500. They are just a few points higher than they were this time last year.

The stock had an impressive run from its Liberation Day lows in early April, rising more than 65% to its highest level in three years before running out of steam. But it had given up around half that gain when the market closed on Tuesday night.

Now, things might be looking up. Cohen, the billionaire investor who took the reins as CEO in 2023, has both a plan to bring gains and a way for investors to bet on that. He also appears to be making strides in improving the business, results posted late on Tuesday show.

A focus on sales of collectibles, including trading cards, action figures, and videogame-related apparel, is proving to be a winner. Overall sales in that division rose 63% from last year to around $228 million over the three months ended on Aug. 2. They now comprise around a quarter of revenue.

A revival in popularity for older games has also boosted console and hardware revenue, which rose 31% to $592 million, partly as a result of demand for the newly released Nintendo Switch 2.

Cohen is also slashing costs. Quarterly selling, general and administrative expenses fell nearly 20% from the same period last year to just under $219 million.

All that helped the group posted stronger-than-expected earnings of 25 cents per share. The stock was up 3.3% at $24.40 in Wednesday trading.

Now, Cohen is adding a new wrinkle that would allow him to raise capital, but only if success in the business lifts the stock price.

GameStop will issue a special dividend, in the form of warrants, to shareholders of record on Oct. 3. Investors will get one warrant for every 10 shares held, granting them the right to buy one GameStop share at $32 each. They will trade separately on the New York Stock Exchange and expire on Oct. 20, 2026.

In short, GameStop shareholders are getting a free call option on the stock. If it rises around 31% from current levels, investors will get upside from their conversion. If not, the warrants will expire worthless, but without costing anything.

GameStop, meanwhile, could collect as much as $1.9 billion from investors if all 59 million of the warrants are exercised.

"The transaction provides shareholders the option to participate in the company's capital raising on a non-dilutive basis," GameStop said, adding it could use the proceeds for potential acquisitions. All the new stock would go to existing shareholders.

The capital raising would add more firepower to its already impressive cash holding of $8.7 billion. It holds a further $528.6 million in Bitcoin, which it began buying earlier this year. Collectively, that is around 81% of the retailer's $11.3 billion in current market value.

GameStop can generate risk-free interest from that cash pile, some of which it raised by issuing zero-coupon convertible bonds. That is a compelling bit of financial engineering from Cohen and his team.

The flip side of that, however, is that Wall Street isn't assigning a great deal of value to GameStop's actual business. And the stock is trading at around 34 times the earnings the company is expected to generate over the next 12 months, according to data from FactSet, well north of the current multiple of 22 times for the S&P 500.

That could be why so many investors are betting against it

Short interest in GameStop shares was last pegged by MarketWatch data at around 67.8 million shares, or 16.6% of the group's outstanding float. That is up from around 9% in September of last year.

The $32 mark for GameStop shares, then, is likely to be a keen focus for both short sellers and company investors over the next 14 months. Let the games begin!

Write to Martin Baccardax at martin.baccardax@barrons.com

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September 10, 2025 15:28 ET (19:28 GMT)

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