In recent days, Metaplanet, a high-profile Japanese listed company, has been dubbed the "Japanese version of MicroStrategy" for its inclusion of Bitcoin in its treasury assets. Recently, the company announced a controversial but eye-catching financing plan - the issuance of zero-interest bonds. The amount of this bond raised was 4.5 billion yen (about 30 million US dollars) with the aim of further increasing its Bitcoin holdings. According to Aiying, Metaplanet has bought more than 1,000 BTC since adopting Bitcoin as its treasury reserve asset in May 2024. In addition, Metaplanet's stock price has risen by 2,450% since January 2024. With the combination of cryptocurrency volatility and high-risk financial instruments, this operation not only brings high-yield fantasies to the market, but also comes with disturbing potential risks. Aiying Fundinsight will break down some of the operating logic here for everyone:
1. Bitcoin Strategy and Zero Interest Bonds: How Does the Combination of the Two Work?
Metaplanet's financing was completed through zero-coupon bonds. Such bonds have no interest payments, and investors' returns come from buying bonds at a price below face value and getting full repayment at maturity. For example, a bond with a face value of 100 yen may be issued at 90 yen, and investors will get 100 yen back at maturity, earning a difference of 10 yen.
For the company, this type of bond financing is extremely cheap. There is no interest pressure, and there is no need to pay periodically. The only burden is to repay the principal when the bond matures. However, Metaplanet did not use the raised funds for regular business operations, but bet all of them on Bitcoin, a highly volatile asset.
Since May 2024, Metaplanet has purchased more than 1,000 Bitcoins. This strategy of using Bitcoin as a treasury reserve asset, learning how MicroStrategy buys Bitcoin with a high ratio of leverage: [Thinking] From 1.8 billion to 111 billion: How does MicroStrategy create a new paradigm of market value growth through Bitcoin-driven and capital leverage? , has become an important corporate representative in the field of cryptocurrency. Metaplanet believes that Bitcoin has long-term appreciation potential, can fight inflation, and as a scarce asset, its value is expected to continue to rise with increasing market demand.
But the risks of this strategy are obvious. If the price of Bitcoin drops sharply, the value of the assets held by Metaplanet will shrink significantly, and a fixed amount of principal must still be repaid when the bonds mature. Once the market value of assets cannot cover the debt, the debt repayment gap will become a huge problem.
2. How does the leverage effect manifest itself in this game?
Metaplanet's bond financing plan is essentially a leveraged operation. The company uses low-cost debt to leverage Bitcoin, an asset with a potential high return, in the hope that after Bitcoin appreciates, the debt will be repaid at a higher value and profits will be retained.
For example, suppose Metaplanet uses 4.5 billion yen of bond funds to purchase Bitcoin at an initial price of 3 million yen per coin, obtaining a total of 150 BTC.
- Optimistic scenario
：The price of Bitcoin rose to 4.5 million yen per coin, and the total market value of BTC held by the company became 6.75 billion yen. After repaying the principal of 4.5 billion yen of bonds, there was still a net profit of 2.25 billion yen, and the leverage operation was successful.
- Pessimistic scenario
：The price of Bitcoin fell to 1 million yen per coin, and the total market value of BTC was only 1.5 billion yen. At this time, the company not only had no profit, but also needed to raise an additional 3 billion yen to repay debts, and the financial pressure increased sharply.
This leveraged strategy amplifies the consequences of Bitcoin price fluctuations: returns double when prices rise, and risks multiply when prices fall.
3. Debt repayment pressure: the dual test of Bitcoin price and cash flow
Although zero-interest bonds have no interest payments, their principal repayment obligations at maturity are fixed. For Metaplanet, debt repayment is challenged by both Bitcoin prices and the company’s cash flow management:
1. Bitcoin price fluctuations
Metaplanet has invested all of its bond funds in Bitcoin, which means that its ability to repay its debts is highly dependent on the performance of Bitcoin prices. If prices fall, the market value of Bitcoin held by the company may not be enough to cover the 4.5 billion yen debt.
For example:
- If the price of Bitcoin drops sharply to 1 million yen per coin when the bond matures, the market value of the 150 Bitcoins held by the company will be only 1.5 billion yen, and it will face a funding gap of 3 billion yen.
- In this case, the company may need to sell other assets, use operating cash flow, or even issue new debt to fill the gap, which will double its financial pressure and even cause the market to worry about its debt repayment ability.
2. Cash flow liquidity and refinancing capacity
If the company's Bitcoin assets fail to be liquidated in time, or if the secondary market liquidity is insufficient, the company may face the dilemma of "no cash on hand" at the time of debt repayment. In addition, if the market questions Metaplanet's credit rating, the difficulty of refinancing will increase significantly.
At present, according to Aiying, Metaplanet has not yet disclosed the specific credit rating of its bonds, but its bond guarantee arrangement shows a certain debt repayment guarantee - through the establishment of priority mortgages on real estate (such as land and buildings) held by subsidiaries, bondholders can obtain certain compensation in the event of default. However, this guarantee can only cover part of the debt, rather than completely solve the problem.
3. Investor perspective: How to view this game of risk and return?
For bond investors, Metaplanet's zero-interest bonds are full of opportunities but also hidden risks:
Credit ratings and market confidence
Credit rating and market confidence are the core concerns of investors. Although Metaplanet's debt issuance provides asset guarantees, investors need to be cautious about its debt repayment ability when its specific rating is not disclosed.
Core variables of the Bitcoin market
The value of Metaplanet's assets is closely related to the price of Bitcoin. If investors believe that Bitcoin will continue to rise in the future, then this bond will be a relatively safe choice; otherwise, the uncertainty of Bitcoin prices will become the biggest risk.
Potential benefits and default risks coexist
Although zero-interest bonds have no interest payments, investors need to weigh the return between the par value and the issue price (for example, buying a 100 yen bond for 90 yen) against the potential risk of default.
IV. Conclusion: Dancing on the edge of a knife under high leverage
Metaplanet has demonstrated an adventurous investment strategy through the financing of zero-interest bonds: using low-cost funds to bet on the future value of Bitcoin. The logic is clear and exciting - if the price of Bitcoin continues to rise, the company will easily make a profit, and shareholders and investors can enjoy the added value of crypto assets. But at the same time, the sharp fluctuations of Bitcoin may also make this adventure costly.
In the future, the success or failure of this gamble will depend on two key factors: the price trend of Bitcoin and the company's ability to manage cash flow. For investors, while pursuing high returns, how to control risks and diversify investments will be the wisest strategy.
