Metaplanet Aims to Increase Bitcoin Holdings Despite Stock Market Turmoil

Metaplanet has secured an additional $130 million through a loan to support its Bitcoin purchasing strategy. The company currently boasts Bitcoin holdings worth approximately $2.67 billion, with its last significant inflow occurring on September 29, during a notable drop in stock prices.

Key Takeaways

Metaplanet has raised $130 million through a loan to buy more Bitcoin.
The company's Bitcoin holdings are valued at around $2.67 billion.
The firm’s strategy involves leveraging high share prices to issue equity, but recent stock price declines have complicated this approach.
To generate fresh capital, Metaplanet plans to issue up to 555 million preferred shares and has sought funding through an international share offering.
Concerns about share dilution and actual returns on Bitcoin holdings are high, as the company's market-based net asset value (mNAV) has fallen significantly.

Metaplanet Aims to Increase Bitcoin Holdings Despite Stock Market Turmoil

Company Overview and Strategy

Metaplanet's approach revolves around a "flywheel" strategy: issuing equity (or warrants) when their share price is high, thereby raising capital to purchase more Bitcoin. This plan, however, has faced challenges due to a recent decline in stock prices, which has made warrant exercises less appealing and weakened this funding channel.

Challenges Following Stock Price Decline

With the reduction of equity-based capital, Metaplanet's aggressive Bitcoin acquisition strategy is encountering difficulties. To counter this, the company has proposed the issuance of up to 555 million preferred shares, a substantial move that comes with dividend obligations. Additionally, Metaplanet has garnered funds through an overseas share sale to keep its operations afloat.

Investor Concerns and Market Valuation

Investors are feeling anxious about the potential for share dilution associated with the new shares. If these new shares do not lead to commensurate value or returns from Bitcoin, the negative impacts could be significant. As a result, Metaplanet's "market-based net asset value" (mNAV)—which measures the company’s market capitalization against the value of its Bitcoin treasury—has declined. At one point, the mNAV dipped to just 0.88, indicating that the market was valuing the company at less than the worth of its Bitcoin assets.

Recent Performance

Over the last two months, the company’s stock has plummeted by 62%. Notably, Metaplanet's cost basis for Bitcoin stands at $108,000, placing added pressure on its acquisition strategy amidst an unstable market environment.

As Metaplanet navigates these challenges, its commitment to increasing Bitcoin holdings remains unwavering, highlighting the volatile yet potent nature of cryptocurrency investment strategies in times of financial instability.