Is Metaplanet in a downward spiral? After a 60% stock plunge, preferred shares come to the rescue.

Metaplanet, known as Japan's version of MicroStrategy, is facing significant challenges as its stock price has plunged 60% and its Bitcoin premium has narrowed sharply. The company plans to raise up to $3.8 billion by issuing perpetual preferred shares to expand its Bitcoin holdings, aiming to become the world's second-largest corporate Bitcoin holder. However, it confronts a dual threat: internal issues with its financing flywheel slowing down, and external pressure from impending Japanese tax reforms that will reduce the regulatory arbitrage advantage for crypto stocks. While leadership remains confident and has secured shareholder approvals for new strategies, investor skepticism persists due to the declining premium and stock performance.

By Nancy, PANews

The Bitcoin flywheel of Metaplanet, Japan’s version of MicroStrategy, is slowing down.

At its recently concluded shareholders' meeting in Tokyo, Metaplanet attempted to boost market confidence through a capital increase and new financing methods, with Trump's son, Eric Trump, even attending in person. Despite the enthusiastic atmosphere, this massive "vote-making" effort did not seem to fully resonate with investors. The company is facing the dual challenges of a malfunctioning internal financing cycle and shrinking regulatory arbitrage opportunities. Whether this new financing structure can reshape its growth strategy remains to be seen.

Launching a financing of up to $3.8 billion, aiming to become the second largest Bitcoin treasury company

On September 1, Metaplanet President Simon Gerovich reviewed the company's transformation from a troubled hotel business to a Bitcoin vault company at the Special Shareholders Meeting on September 1, highlighting the company's achievements in the 16 months of operation as a Bitcoin reserve company and outlining the company's plan to purchase a total of 210,000 Bitcoins by 2027, accounting for 1% of the total supply.

According to the latest data from BitcoinTreasuries.net, Metaplanet currently holds 20,000 Bitcoins, with an average holding cost of $102,607. This makes it the sixth-largest publicly traded Bitcoin holder, behind Strategy, MARA, XXI, Bitcoin Standard Treasury Company, and Bullish. At current prices, Metaplanet's market capitalization exceeds $2 billion, and its Bitcoin holdings have yielded nearly 7.5% as of September 2nd.

To this end, Metaplanet has received approval to raise up to $3.8 billion to purchase additional Bitcoin. Over the next two years, the company will purchase 190,000 Bitcoins through its newly launched perpetual preferred stock product (Metaplanet Prefs). According to Simon, the preferred stock will not only serve as Metaplanet's core financing tool for acquiring additional Bitcoin, but will also establish a Bitcoin-backed yield curve with potential returns that could even exceed those of traditional fixed-income products in Japan. Given the limited returns offered by traditional markets, if Metaplanet successfully launches and markets this innovative product, it is expected to become the largest issuer of Bitcoin-backed fixed-income products in Asia.

Prior to this, Strategy pioneered the introduction of perpetual preferred stock, which typically does not carry voting rights but offers higher dividends than common stock. This model is uncommon in Japan, primarily due to factors such as conservative corporate financing structures, strict legal and regulatory requirements, and investors' preference for fixed income.

Metaplanet will reportedly issue two classes of preferred stock (with a maximum dividend of 6%) for investors with varying risk appetites. Class A preferred stock, similar to traditional fixed income, will offer a 5% yield; Class B includes an option to convert to common stock, but carries a higher risk. Simon noted that these products offer four major advantages: first, they provide a new financing channel; second, they eliminate the need for frequent refinancing; third, they offer lower financing costs than most peers (thanks to Japan's long-term low interest rates); and fourth, by capping preferred stock issuance at 25% of Bitcoin's net assets, they create a financial risk "safety valve" for the company.

At the meeting, Metaplanet shareholders also approved several resolutions, including increasing the authorized share count (revision of the authorized share count cap to 2,723,000,000 shares), holding shareholders meetings at no fixed location (permitting online shareholder meetings), and establishing authorized share classes. Simon also announced Metaplanet's goal to become the world's second-largest Bitcoin holder, after Strategy, and stated that Metaplanet's per-share Bitcoin ownership has increased to 2,274% over the past year, far exceeding Strategy's 86%.

It is worth mentioning that Metaplanet strategic advisor Eric Trump also attended this special shareholders' meeting. He holds 3.3 million shares of Metaplanet, supports Metaplanet's Bitcoin strategy, and highly praised Simon, saying, "Simon is one of the most honest people I have ever met in my life. You have an outstanding leader and a great product, Bitcoin. This is a winning combination." In addition, Simon also disclosed that Fidelity and Charles Schwab are Metaplanet's largest shareholders, holding approximately 20% of the shares.

Metaplanet faces double squeeze as its stock price plummets 60%

In contrast to the lively atmosphere of the shareholders' meeting, Metaplanet is experiencing the constraints of its flywheel strategy.

Despite Metaplanet's status as a leading Bitcoin reserve company, its new plan had a limited impact on its stock price, which rose only 0.83% after opening today, reflecting a relatively muted market reaction. In fact, since its all-time high of $15.35 in mid-May, its stock price has fallen approximately 60.2%. Meanwhile, the growth rate of its Bitcoin holdings has slowed significantly, increasing by only approximately 16.7% over the past month, compared to a 92.7% surge the month before.

Furthermore, Metaplanet's Bitcoin premium is narrowing. The premium, defined as the ratio of market capitalization to the company's net asset value (NAV) of Bitcoin on its books, is a key metric for determining the viability of the "Bitcoin Vault Model." The smaller the premium, the less advantage a company has in raising capital through stock issuance to buy Bitcoin, and the higher the cost of increasing its holdings. The larger the premium, the lower the cost of raising capital through stock issuance, making it more effective in expanding its Bitcoin holdings. Data shows that Metaplanet's NAV multiplier (market capitalization to net asset value) was as high as 8.5 at the end of May and has now fallen to just 1.9. This suggests that investor confidence in its Bitcoin holdings is significantly weakening.

But Metaplanet's challenges are not limited to the company level; the external environment is also changing.

Previously, one reason Japanese investors preferred buying crypto stocks over directly holding crypto assets was regulatory arbitrage. PANews previously reported that Japan's heavy tax burden on crypto assets, while stock investments enjoy a more favorable tax system, has led investors to favor crypto stocks. However, recent developments indicate that the Financial Services Agency (FSA) plans to adjust the tax rate on crypto assets from a maximum progressive rate of 55% to a flat 20% rate, in line with stocks, in its 2026 tax revision. Once implemented, the tax gap between investors holding spot crypto and related stocks will significantly narrow, reducing the incentive to buy stocks instead of holding cryptocurrencies.

Metaplanet is facing a double squeeze. On the one hand, its internal flywheel is stalling, with premiums narrowing, stock prices falling, Bitcoin holdings slowing, and financing models constrained. While Metaplanet is hoping to attract overseas capital by issuing preferred shares, whether this will be a lifeline remains uncertain. On the other hand, the erosion of external arbitrage and tax reforms have weakened the institutional appeal of crypto stocks, prompting potential investors to turn directly to spot trading or ETFs.