Metaplanet Limits Bitcoin Allocation to 85% with New 15% Rule

Metaplanet holds 44,000 Bitcoin (BTC). Its market capitalisation, however, is lower than the value of those coins. The company updated its internal rules on Monday, permitting as much as 15% of its holdings to be placed in assets other than Bitcoin.

Starting in April 2024, Metaplanet collected funds from investors and put them into Bitcoin. Going forward, roughly 85% to 90% of its assets will remain in the cryptocurrency.

Use of Metaplanet's 15% Non-Bitcoin Allocation

Chief Executive Simon Gerovich stated that acquiring Bitcoin was never the sole objective.

“From the beginning, our strategy was never simply to accumulate Bitcoin,” he stated.

According to the company's regulatory filing, the new allocation serves three purposes:

• Finance acquisitions
• Purchase yield-bearing securities, and
• Provide initial capital for a planned investment business.

During August, Metaplanet reached an agreement to transfer 2,100 BTC and $2.5 million to Super League Enterprise, a media firm listed on Nasdaq. Metaplanet expects to gain control of the company, subject to approvals, and rebrand it as Superplanet.

The third purpose involves a Net Interest Income Strategy, which raises capital and invests it in assets yielding returns above the cost of funding. Any profits would be used to purchase additional Bitcoin, although the filing cautions that outcomes are not assured.

Obstacles to Metaplanet Selling New Shares

Metaplanet's regulations prohibit most new share issuances as long as its market value remains below that of its Bitcoin holdings. Including debt, the market priced the company at 74 cents for each dollar of Bitcoin on Monday, per BitcoinTreasuries.

With Bitcoin trading at approximately $86,070, Metaplanet's stash is valued at around $3.8 billion. The company's equity is worth roughly $2.1 billion.

To fund growth, Metaplanet now relies on loans, bonds, and preferred shares that carry a fixed dividend for investors. Borrowing under its Bitcoin-backed credit line to acquire more Bitcoin remains limited to roughly 10% of the coin value.

During the third quarter, Metaplanet sold more Bitcoin than its total debt and retained the proceeds. Subsequently, it repurchased a larger amount than it had sold, resulting in a net addition of 1,000 BTC.

“Rating agencies and credit investors ask one question of a Bitcoin company: can that Bitcoin be turned into cash to meet obligations, and will it be? We answered by doing it,” Gerovich commented.

The company is now seeking a credit rating. However, the Tokyo exchange may still disapprove its proposal to list preferred shares.