GameStop Follows MSTR's Footsteps: Why Will Investors Buy Convertible Notes With No Interest?

As GameStop Corp. (NYSE:GME) has announced a convertible bond offering to acquire Bitcoin (CRYPTO: BTC), mirroring Strategy Inc.‘s (NASDAQ:STR) plan, experts explain why investors would buy a bond with a 0% coupon.

What Happened: After announcing the change in its investment policy to include Bitcoin as a treasury reserve asset, Ryan Cohen‘s GameStop announced a proposed private offering of $1.3 billion of 0% convertible senior notes.

These notes are general unsecured obligations of GameStop, which will not bear regular interest, and the principal amount of the notes will not accrete.

Institutional investors usually invest in convertible bonds because they’re a hybrid investment instrument that can be exchanged for equity in the company at a later date. The conversion feature of these notes eventually helps the debt holders to participate in the equity upside on conversion.

But apart from that, according to Tom Lee, the CIO at Fundstrat Capital, these bonds also provide debt investors an exposure to Bitcoin, which he described as a “novel strategy,” in the case of erstwhile MicroStrategy, led by Michael Saylor.

“You might wonder why are bondholders buying these ...