Key Takeaways
Despite Bitcoin’s recent price gains, Metaplanet’s stock has fallen by 54% since June, slowing its “flywheel” strategy. This is why CEO Simon Gerovich is pursuing alternative fundraising to continue growing the company’s Bitcoin reserves.
Tokyo-listed Metaplanet, known for its aggressive Bitcoin [BTC] accumulation, is facing mounting pressure after its share price continued to slide.
Despite Bitcoin gaining by roughly 2% over the same period, Metaplanet’s shares have fallen by 54% since mid-June – Putting its capital-raising “flywheel” under strain.
For those unaware, the “flywheel” strategy is a mechanism in which a company leverages rising stock prices to secure funding through MS warrants issued to its key investor, Evo Fund.
Metaplanet’s performance till date
Needless to say, the sharp decline has made warrant exercises less attractive, squeezing liquidity and slowing the company’s Bitcoin acquisition strategy, according to a report by Bloomberg.
According to Google Finance, the stock was also trading at 879 JPY at press time, down 2.22% in the last 24 hours and down 23.63% over the past month. Meanwhile, Metaplanet currently holds 18,991 BTC. It is now ranked as the seventh-largest public corporate Bitcoin holder.
The firm has also set ambitious targets, with goals to expand its holdings to 100,000 BTC by the end of 2026 and 210,000 BTC by 2027.
Metaplanet’s “flywheel” strategy loses traction
Now, with its traditional “flywheel” strategy losing traction due to the recent stock decline, Gerovich is exploring alternative fundraising avenues. In fact, just recently, Metaplanet announced plans to raise approximately 130.3 billion yen ($880 million) via a public share offering in overseas markets.
Additionally, shareholders will vote on 1 September regarding the issuance of up to 555 million preferred shares. These could generate as much as 555 billion yen ($3.7 billion).
In an interview with Bloomberg, Gerovich described the preferred shares as a “defensive mechanism,” enabling capital infusion without diluting common shareholders if the stock continues to fall.
Gerovich noted,
“We don’t want to fall behind — people are racing to buy Bitcoin. I want another tool in my toolkit.”
These shares are expected to offer up to 6% annual dividends and are initially capped at 25% of the firm’s Bitcoin holdings. This would potentially attract Japanese investors seeking yield in a low-interest environment.
Why are analysts cautious?
However, many analysts remain cautious as Metaplanet’s market value now sits at roughly twice the value of its Bitcoin holdings, down from a “Bitcoin premium” of over eight times in June.
For instance, Natixis analyst Eric Benoist noted,
“The Bitcoin premium is what drives the success of the entire strategy. If the premium compresses, then they can’t accumulate on the same advantageous terms, the interest decreases, and the stock goes down.”
Adam Livingston added,
“If Metaplanet totally stopped buying Bitcoin forever, the returns over the next decade would still be incredible.”
In conclusion, Technical analyst Vincent put it best when he said,
“Looking at the weekly chart of Metaplanet (3350), it gives me the sense that an upward reversal may be starting.”
These developments come on the back of the company preparing for its inclusion in the FTSE Japan Index. CEO Gerovich believes this as an “important milestone” in Metaplanet’s mission to strengthen its position as a leading Bitcoin treasury firm.
