Metaplanet Takes $130M Bitcoin-Backed Loan to Double Down on BTC Strategy

Tokyo-listed Metaplanet, a company that has prominently integrated Bitcoin into its corporate treasury strategy, has announced the draw of an additional $130 million in Bitcoin-backed credit. 

This latest financial maneuver significantly expands its use of collateralized borrowing, aiming to fuel further Bitcoin acquisitions, bolster income-generation strategies, and potentially support share buybacks. 

The company disclosed on Tuesday that the $130 million loan was executed last Friday under a previously established credit facility. This specific borrowing is part of a larger $500 million credit line, which provides Metaplanet with the flexibility to access short-term liquidity by leveraging its substantial Bitcoin holdings as collateral. 

With that recent infusion of capital, Metaplanet’s cumulative draws from this facility now stand at $230 million, an increase from the $100 million previously disclosed following an initial credit pull on Oct. 31.

Acknowledging the inherent risks associated with such financial instruments, Metaplanet stated its awareness that borrowing against its Bitcoin reserves exposes it to potential collateral calls should the price of BTC experience a significant decline. 

However, the company expressed confidence in the robustness of its balance sheet and the scale of its Bitcoin reserves, asserting that its holdings are sufficient to withstand market volatility. 

In its disclosure, Metaplanet explicitly noted, “Given the substantial scale of Bitcoin holdings relative to the loan amount, the Company expects to maintain sufficient collateral headroom.” 

Also read: Metaplanet Plans Fresh Funding Round as Bitcoin Treasury Sinks Deeper Into the Red

Leveraging Bitcoin-Backed Debt

The cornerstone of Metaplanet’s debt-based financing is its $500 million Bitcoin-backed credit facility. This mechanism provides the company with flexible, on-demand liquidity secured by its existing Bitcoin reserves. 

The strategic advantages of the facility are manifold: it enables Metaplanet to expand its Bitcoin income generation programs, acquire more Bitcoin without immediately liquidating existing holdings, and support potential share buybacks. 

Importantly, that approach allows the company to enhance shareholder value and manage its capital structure without the need to issue new equity shares, which could dilute existing ownership. 

The credit facility is structured for short-term and easily repayable transactions, offering agility in its financial operations.

Strategic Long-Term Equity Financing

Parallel to its credit facility, Metaplanet has outlined a separate plan to raise an additional $135 million through the issuance of new Class B perpetual preferred shares. 

Unlike the short-term, revolving nature of the credit facility, those preferred shares represent a commitment to long-term funding. 

Investors who acquire those shares are typically offered a fixed yearly payout, providing a stable return on their investment. Furthermore, these shares often carry provisions for conversion into regular common stock under specified conditions, and in certain circumstances, the company may have the option to buy them back. 

Navigating Market Volatility and Unrealized Losses

Despite its proactive accumulation strategy, Metaplanet, like many institutional Bitcoin holders, is currently navigating a period of unrealized losses on its Bitcoin investments. 

Data from BitcoinTreasuries.NET indicates that the company is presently sitting on an approximate 19% unrealized loss. 

Metaplanet BTC holdings (Source: Bitcoin Treasuries)

That figure is derived from its average Bitcoin acquisition cost of $108,036, juxtaposed against the current market price for BTC, which hovers around $87,000 at the time of reporting.

Notwithstanding those paper losses, Metaplanet has consistently affirmed its commitment to its long-term Bitcoin strategy. 

The company continues to hold onto its existing Bitcoin and actively seeks opportunities to accumulate more. 

Dylan LeClair, Metaplanet’s Bitcoin strategy director, publicly reinforced this stance on the social media platform X, stating that the company is unequivocally “HODLing” – a popular term in the crypto community for holding assets despite price fluctuations.

The timing of Metaplanet’s latest loan draw has also sparked discussion within the crypto community. 

A community member identified as Ragnar on X connected the loan’s execution date on Friday with a notable dip in Bitcoin’s price, which fell to approximately $82,000 on that same day. 

Ragnar speculated, “It’s very likely that they bought the Bitcoin dip. I like the stock,” suggesting that Metaplanet may have strategically utilized the newly acquired capital to purchase Bitcoin at a lower price point, further cementing its long-term accumulation objective.