Metaplanet: The Bitcoin Flywheel Is Paused, Not Broken

Summary Metaplanet offers leveraged exposure to Bitcoin via a Japan-based treasury strategy, currently trading at a discount to NAV after a sharp stock decline. The equity issuance flywheel is paused as mNAV fell below 1.0, but Metaplanet preserves BTC per share by avoiding dilutive issuance and using alternative funding. The recent acquisition of Siiibo Securities positions Metaplanet to tap Japan’s yield-starved market with BTC-backed credit products, potentially lowering funding costs further. I remain constructive on Metaplanet as a leveraged BTC play with a margin of safety from the NAV discount, contingent on a bullish BTC outlook. Just over nine months ago, I shared a bullish update on Metaplanet ( MTPLF ). I explained how Metaplanet offers access to Japan’s localized Bitcoin treasury flywheel by using equity raised above NAV and low-cost instruments to convert market enthusiasm into more BTC per share. Today, that flywheel has paused. Paused, but not broken, though. Since last September, the stock has plummeted, as one would expect given Bitcoin's ( BTC-USD ) underperformance. At the same time, Metaplanet's mNAV premium has not only compressed but also fallen below 1.0. Therefore, the flywheel of issuing equity above NAV to grow BTC per share has temporarily halted. Still, Metaplanet has maintained positive operating income and, when it could, purchased more BTC using other instruments. Also, last week, the company announced the acquisition of Siiibo Securities. This could provide a way to tap Japan’s yield-starved market for future BTC purchases. BTC Climbed Without the Flywheel The pain Metaplanet shareholders (myself included) have experienced since my last update has been brutal. Bitcoin has obviously performed poorly, down from over $110,000 at the time to $66,500 today. That alone would have dragged Metaplanet lower. But further share price losses came from the mNAV compression. Metaplanet's mNAV stood at 1.98x at the time, so management could drive BTC per share up by selling equity at a premium to NAV. Metaplanet's EV/NAV (Metaplanet Analytics) That was part of the bull case itself. If a Bitcoin treasury company trades at a premium NAV, every dollar of new common equity can buy more BTC than the BTC claim attached to the share being issued. By doing this repeatedly, the company can increase BTC per share even while diluting the count. But when Bitcoin falls and investors lose patience, mNAV compresses. When it compresses below 1.0, the company’s most powerful accretion tool becomes temporarily unusable. Metaplanet is aware of this. In their moving-strike warrant structure (think of it as the equivalent of an ATM offering), exercise is generally permitted only when mNAV is 1.01x or higher. Management is trying to avoid issuing equity when it would hurt BTC per share. In any case, it is not a thesis break. Today, Metaplanet holds 40,177 BTC, more than double the stack it had last September. The major funding for this came from an overseas share offering valued at about $1.4 billion. A smaller part of this, however, was funded through the company’s preferred, Mercury. It raised about ¥21.25 billion, or roughly $150 million, last November. Metaplanet's BTC Holdings (Metaplanet Analytics) What's more interesting here, in my view, is not necessarily the amount raised but that this preferred pays a 4.9% fixed annual dividend at par. This is a much lower cost of capital than Strategy's ( MSTR ) preferreds. Metaplanet can sell senior equity at below half the cost that Strategy is raising capital through its main credit (despite it technically being equity, the company refers to it as digital credit) vehicle, STRC ( STRC ). This backs the argument that Japan is yield-starved, and while a company like Strategy is likely going to enjoy much better liquidity and a much broader set of financial engineering levers, given it can hit the ATM on its preferreds on a daily basis, Metaplanet could do so much cheaper, even if in a more analog way (given its preferreds are still not public). The other piece is Metaplanet’s Bitcoin Income Generation business, which monetizes BTC volatility by selling option premiums. This is not a risk-free strategy, and it could even lead to Metaplanet losing some of BTC's upside potential on the table. Still, so far, it's been proven to be a great way to hedge against BTC's poor returns. In Q1, Metaplanet generated ¥3.08 billion (about $19 million) of revenue and ¥2.27 billion of operating profit (about $14 million), with the BTC Income Generation segment contributing the bulk of that. Metaplanet's Bitcoin Revenue (Metaplanet Analytics) Siiibo Could Be the Missing Pipe This brings us to Siiibo Securities. It could be the missing pipe for Metaplanet to enter the digital credit business. Strategy has done this by becoming the issuer of preferred stock. Metaplanet seems to want to take a more classic debt-oriented path. So last week, Metaplanet announced the acquisition of Siiibo for ¥2.1 billion, or about $13 million. After closing, Siiibo is expected to become a wholly owned subsidiary and be renamed Metaplanet Securities. I know you are thinking this sounds like too small an acquisition relative to the company's multibillion-dollar Bitcoin stack, but it's more about the possibilities this buyout can unlock for Metaplanet. Siiibo is a regulated bond platform (they have handled 100+ offerings for around 40 companies so far). By buying them, Metaplanet seems to be buying up a distribution channel for its own BTC-backed credit. As I just mentioned, Japan is still a deeply yield-starved market. Even after rate normalization began, huge amounts of household wealth, estimated at over $7 trillion, remain parked in cash and low-yield deposits. That creates an opportunity. A BTC-backed or BTC-linked yen product will not be for every investor, and it should not be marketed as safe in the traditional sense. But for investors seeking yield and even issuers seeking differentiated collateral, Metaplanet Securities could serve as a bridge. Also, if Metaplanet was able to raise funds at 4.9% through its preferred equity, its BTC-backed bonds could be issued at a much lower rate. It could be at 4%, 3%, or cheaper, given they would be higher in the capital stack. In turn, those issuances could help fund additional BTC purchases. If it works, Metaplanet will not need to rely only on a hot common stock price to keep stacking. In fact, if the company is welcomed by the credit markets, the common stock could return to investors’ favor too, reclaiming its premium and allowing the company to resume the flywheel of selling common equity above mNAV. The Discount Is the Point Last year's premium to NAV made the stock exciting because accretion was possible. Today's discount still makes the stock exciting, as a reversion to NAV could amplify returns on top of any potential BTC gains. That is the case, of course, assuming one is bullish on BTC in the first place. Otherwise, the whole thesis breaks down. Regardless, I continue to like Metaplanet here despite the painful losses. This is because it's a leveraged BTC that could outperform BTC if BTC rallies from here, while still offering somewhat of a margin of safety considering the discount to NAV.