Summary Metaplanet Inc. is a Japanese company that has gone all-in on the Michael Saylor Bitcoin playbook. Recently trading on the U.S. OTCQX market, the Company does not have a long track record and its shares are thinly traded in the U.S. Until the company differentiates itself from its competitors, U.S. investors are better off investing in one of the U.S. domiciled Bitcoin holding companies. Tokyo-based Metaplanet Inc. ( OTC:MTPLF ) (the " Company ") is a Japanese investment firm following the Michael Saylor /MicroStrategy ( MSTR ) Bitcoin ( BTC-USD ) (" Bitcoin ") playbook (as describe herein, the " Saylor Playbook "). Originally a firm with diverse business interests, the firm has scrapped its prior business model and shifted its focus to Bitcoin. The " Our History" section of the Company's website discusses the shift: Metaplanet boasts over a decade of diversified business engagement. With deep roots in Japan, our dynamic team comprises seasoned professionals with expertise in finance, trading, real estate, and Bitcoin. In response to the pandemic-induced investment landscape, Metaplanet comprehensively restructured its diverse assets and businesses, paving the way for a strategic pivot towards a Bitcoin-centric vision." Moreover, the Company is clearly all-in when it comes to Bitcoin, including a literal manifesto on its website. The manifesto states that: Metaplanet Inc., a publicly traded company listed on the Tokyo Stock Exchange (3350), has embarked on a strategic transformation. By leveraging Bitcoin as its principal treasury reserve asset, Metaplanet will utilize excess cash flow and implement accretive corporate governance, including financial management strategies such as debt and equity financing, to further its Bitcoin accumulation. This strategic pivot is driven by Bitcoin’s unique attributes, including its absolute scarcity and apolitical monetary policy." As reconstituted, the Company's core business segments are 1) Bitcoin investment, 2) Bitcoin Consulting, and 3) Real Estate. I will briefly discuss each of these business segments below in reverse order. Real Estate : With respect to its real estate portfolio, it appears to primarily consist of interests in hotels, including The Royal Oak Gotanda , a hotel located in the heart of Tokyo. In 2024, per a December 18, 2024 Earnings Forecast disclosure (the " Forecast Disclosure "), the Company advised that the hotel business performed well in 2024 with high occupancy and room rates. Specifically, for 2024, the Company has projected revenue of 370 million yen and operating profit of 135 million yen . Consulting : The Bitcoin consulting segment assists other businesses in adopting Bitcoin as a treasury reserve asset, including related services. As far as I can tell, revenue from this segment is currently de minimis . Bitcoin Investment : The goal of the Company's Bitcoin Investment segment is "to enhance shareholder value through strategic, perpetual Bitcoin accumulation, aligned with a proven long-term, value-accretive vision. Through this approach, Metaplanet is able to develop business verticals that align with the overarching mission of adopting a corporate Bitcoin standard." The investment strategy involves financial engineering, including "equity financing considerations and long-dated fiat currency market arbitrage, all executed within a Bitcoin-centric framework." According to management, the strategy is currently working, even when unrealized appreciation in the price of its Bitcoin holdings is removed from the equation. For example, per the Forecast Disclosure: [I]ncome from selling Bitcoin put options, introduced during the current fiscal year [2024], is expected to generate 520 million yen in revenue. Combined with the strong performance of the hotel business, even though the SG&A expenses were expected to be about 385 million yen, the company is on track to record consolidated operating profit for the first time since FY2017." Additionally, in the fourth quarter of 2024, the firm has announced a new initiative : The initiative seeks to leverage “long-term debt and periodic equity issuances to continually accumulate Bitcoin as an alternative to holding a weakening yen. This also includes tapping convertible bonds and other financial instruments to stack even more satoshis." As of December 23, 2024, per its Notice-of-Additional-Purchase-of-Bitcoin (the " Purchase Disclosure "), the Company held 1,761.98 Bitcoin. At the time of writing, this translates into roughly $175 million worth of Bitcoin (assuming a Bitcoin price of $99,000). This compares to 141 Bitcoin held by the Company on June 30, 2024 and 399 Bitcoin held by the Company on September 30, 2024. The Company has clearly accelerated its acquisition of Bitcoin over the past few months. Bitcoin Yield Following MicroStrategy's lead, the Company utilizes the key performance indicator (" KPI ") of bitcoin yield (" BTC Yield "). BTC Yield is a measure of the percentage change from one period to the next of the ratio of the Company's Bitcoin holdings and its assumed diluted shares outstanding (including potential shares from raising equity and convertible debt). The Company uses this KPI to assess the performance of its Bitcoin investment strategy. If successful, the strategy is accretive to shareholders in Bitcoin terms (e.g., each share of the Company represents a higher fraction of Bitcoin). In the second half of 2024 the strategy has been successful, as noted in the Company's recent Purchase Disclosure: The firm highlights that its newly implemented BTC Yield, a key performance indicator ((KPI)), is up from 41.7% between July and September 2024 to 309.82% between Oct. 1 and Dec. 23." Of course, as a shareholder of the Company, an increasing BTC Yield is great so long as the price of Bitcoin continues to rise, in which case the high BTC Yield demonstrates management's ability to leverage equity and debt financing. If the Bitcoin price were to fall by 50% or more in the next downturn (not unrealistic based on past history, in which case the Company is like to fall by even more), then the additional Bitcoin accreting to shareholders will be of less value since no one wants to own more of a depreciating asset. [Of course, true believers in Bitcoin will simply ride the storm, believing that the asset will recover quickly and soar to greater heights in the future.] New Initiatives While the Company is clearly following the Saylor Playbook, I give it credit insofar as management is really trying to move the needle to advance Bitcoin. For example, the Company is launching a magazine , Bitcoin Magazine Japan, and rolling out some Bitcoin benefit options for shareholders, among other plans. Balance Sheet Operating as a foreign issuer, the Company is not subject to the same disclosure laws as public companies domiciled in the United States. A summary of the most recent balance sheet for the period ending September 30, 2024 is shown below. (Thousands of Yen) December 31, 2023 September 30, 2024 Cash & Deposits 553,175 1,966,394 Total Current Assets 599,412 2,146,987 Bitcoin Assets -- 4,507,081 Total Non-Current Assets 1,066,725 5,629,873 Total Assets 1,666,137 7,819,250 Total Current Liabilities 378,125 2,413,501 Long Term Borrowing 130,501 135,515 Total Non-Current Liabilities 135,924 143,451 Total Liabilities 514,049 2,556,953 Shareholder Equity 1,152,087 5,262,297 The Company's current ratio declined from 1.58 at 2023 year end to 0.89 for the quarter ended September 30, 2024. This is indicative of greater short-term leverage, and not a positive factor in my few. Moreover, while the total assets to total liabilities ratio was 3.06 on September 30, 2024, that ratio declined compared to total assets exceeding total liabilities of 3.24 on December 31, 2023. This suggests to me that management is adding risks that might not be fully appreciated by investors. Other risks of owning shares in the Company are analyzed below. Analysis of Certain Risks 1) A long-term investor should consider whether they should simply acquire Bitcoin directly rather than investing in a Bitcoin holding company like Metaplanet Inc. Investing in the Company requires confidence in management's ability to engage in successful financial engineering transactions. Such analysis of management competence is unnecessary when an investor simply buys Bitcoin directly. Moreover, management might put its own interests ahead of the interests of shareholders. Buying Bitcoin directly avoids such risk. 2) Bitcoin is a high beta investment. Investing in leveraged Bitcoin holding companies like the Company will only amplify the volatile ride, which many investors may not be equipped to manage successfully. 3) For the quarter ended September 30, 2024, per the Forecast Disclosure linked above, the majority of the Company's revenue (520 million yen ) came from its exercise of certain Bitcoin put option strategies, giving the Company a hedge fund vibe versus being an actual operating company. 4) The Company's operations utilize the Japanese yen , which has declined materially over the last five years. The chart below shows the performance of the yen via the Invesco CurrencyShares® Japanese Yen Trust ETF ( FXY ) and the US Dollar Index ( DXY ). Seeking Alpha Needless to say, ownership of the Company includes material foreign currency risk associated with the yen . 5) While the Company started trading on the U.S. OTCQX market on December 19, 2024 , it is ultimately hard to see how the Company, as a foreign issuer with yen exposure and a limited track record, will differentiate itself to U.S. investors in the near term. Investors can buy Bitcoin directly or they can buy a U.S. domiciled Bitcoin holding company like MicroStrategy, which, notably, is now included in the Nasdaq 100 index and the beneficiary of passive flows and high trading volumes. The Company on the other hand has very low trading volume in the U.S. (e.g., per Seeking Alpha , less than 500 shares exchanged hands on January 8, 2025). Conclusion Based on the foregoing analysis, I see no reason for U.S. investors to acquire shares of the Company at this time. I'll check back in on the Company later in the year to see if the story has changed. For now, I am staying on the sidelines. Of course, do your own due diligence.
