GameStop NYSE:GME fell 8.33% premarket after agreeing to exchange about $1.4 billion of convertible senior notes for Class A common stock in privately negotiated deals with existing holders. The notes are $400 million of 0.00% converts due 2030 and $1.0 billion due 2032. GameStop receives no cash proceeds from the share issuance.
The exchange cuts long-term debt by roughly $1.4 billion without using cash, leaving about $1.1 billion of 2030 notes and $1.7 billion of 2032 notes outstanding. The number of shares to be issued depends partly on the average volume-weighted average price over 35 consecutive trading days starting today, subject to a per-share price floor, so the share count will not be fixed until that window closes. The exchange is expected to close on or about September 23.
GameStop also said some or all of the participating noteholders may buy or sell shares in the open market, or enter and unwind derivative positions to hedge or unwind their note investments, and that the effect on the share price could be material.