Top Meme Stock Wipes Out $1.4 Billion in Debt With Stock Swap. How to Play It Here.

GameStop (GME) recently moved to strengthen its balance sheet by reducing long-term debt. The retailer turned meme stock legend recently announced that it has agreed to swap approximately $1.4 billion in convertible senior notes for shares of its common stock.

For a company that built its comeback story on cash and patience, this is another sign that management wants a cleaner balance sheet heading into its biggest deal yet. Let's take a closer look.

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GameStop has entered into privately negotiated agreements with existing holders of its 0.00% Convertible Senior Notes due 2030 and 2032. These noteholders are exchanging about $400 million of the 2030 notes and $1 billion of the 2032 notes for shares of Class A common stock.

Once the deal closes, these notes will be canceled, leaving roughly $1.1 billion of 2030 notes and $1.7 billion of 2032 notes still outstanding. However, GameStop's total long-term debt will drop by about $1.4 billion.