Metaplanet Faces Challenges in Bitcoin Fundraising Strategy Amid 54% Stock Decline

Metaplanet, the Tokyo-listed company aggressively acquiring Bitcoin, is under increasing strain as its share price declines, jeopardizing the fundraising model that has helped it amass one of the largest corporate Bitcoin treasuries worldwide.

The firm’s stock has plummeted 54% since mid-June, while Bitcoin (BTC) has only risen by about 2% during the same timeframe. This downturn has stressed its capital-raising “flywheel,” which relies on rising share prices to facilitate funding through MS warrants given to Evo Fund, its main investor.

With shares significantly down, exercising these warrants is less appealing for Evo, constraining Metaplanet’s liquidity and hindering its Bitcoin acquisition plans, according to a report by Bloomberg on Sunday.

Guided by former Goldman Sachs trader Simon Gerovich, Metaplanet currently possesses 18,991 BTC, making it the seventh-largest public holder, as per BitcoinTreasuries.NET. The company aims to increase its holdings to 100,000 BTC by the end of 2026 and 210,000 BTC by 2027.

Related: Metaplanet, Smarter Web add almost $100M in Bitcoin to treasuries

Metaplanet turns to overseas markets

As its “flywheel” strategy loses traction, Gerovich is exploring alternative fundraising avenues. On Wednesday, Metaplanet announced intentions to raise about 130.3 billion yen ($880 million) through a public share offering in international markets.

Furthermore, shareholders will decide on Monday whether to authorize the issuance of up to 555 million preferred shares, an unusual instrument in Japan, which could potentially generate up to 555 billion yen ($3.7 billion).

In a Bloomberg interview, Gerovich described the preferred shares as a “defensive mechanism,” facilitating capital influx without diluting common shareholders if the stock price continues to fall. These shares are expected to provide up to 6% annual dividends and will initially be capped at 25% of the firm’s Bitcoin holdings, potentially attracting Japanese investors seeking yield.

Related: Metaplanet plans to raise additional $3.7B to buy Bitcoin

Falling Bitcoin premium puts Metaplanet’s strategy at risk

Nevertheless, analysts remain cautious. “The Bitcoin premium is crucial for determining the success of the entire strategy,” stated Eric Benoit of Natixis. This premium, the difference between Metaplanet’s market capitalization and the value of its Bitcoin assets, has decreased from over 8x in June to merely 2x, escalating the risk of dilution.

The company has paused Evo’s warrant exercises from Sept. 3 to 30, allowing for the preferred stock issuance. Whether this transition can stabilize Metaplanet’s funding strategy is still uncertain.