GameStop re-pledges 4,709 BTC in Coinbase covered calls

GameStop re-pledged 4,709 bitcoin into covered-call contracts with Coinbase Prime, converting the coins on its balance sheet into a $369.6 million receivable and recognizing roughly $1 million in gains on digital assets for the quarter, according to an SEC filing covering the three months ended May 2.

Under the covered-call arrangement, GameStop sold counterparties the right to purchase the bitcoin at fixed strike prices in exchange for upfront premiums. Accounting rules require the company to remove pledged coins from intangible-asset classification and record a claim for repayment; the receivable is about $58 million below the company’s cost basis for the pledged coins.

The options activity generated $5.8 million in premiums during the quarter, with a net contribution of about $1 million to reported earnings from digital assets. GameStop reported a record net income of roughly $390 million for the period, driven mainly by interest earned on its cash holdings and a paper gain on an eBay options position.

GameStop began building its bitcoin position after borrowing $1.5 billion in March last year and accumulated about 4,710 BTC. Earlier in the year the company moved all but 1 BTC into the covered-call strategy. An earlier set of options expired worthless on May 29 and the company renewed the arrangement under similar terms.

The renewed contracts carry a strike price of $80,000, down from a prior range of $105,000 to $110,000. By the close of the filing period, bitcoin traded near the $80,000 strike, increasing the value of counterparties’ right to claim the coins. Since prices remained below the strike through May 29, the options were not exercised and GameStop retained the premiums.

At later points the market price declined, leaving GameStop’s average purchase price above spot. The filing notes the receivable reflects current accounting treatment rather than the coins remaining as direct holdings.

The Coinbase Prime agreement grants the exchange certain rights over the pledged coins consistent with custody and trading arrangements. The contracts exchange potential upside above the strike for immediate cash premiums and keep nearly all of GameStop’s bitcoin tied up under the counterparty terms.