The Metaplanet Convertible Bonds will enable the company in Japan to raise around ¥51.9 billion (equivalent to $340 million) to pay off Bitcoin-backed debts and buy back shares.
According to a filing on October 13, the Japanese company said that the zero-coupon bonds due to mature in 2031 won’t finance any further investments in Bitcoin.
This strategy now puts the spotlight on repaying debt and rewarding shareholders rather than investing in Bitcoin.
Metaplanet, headed by CEO Simon Gerovich, had approximately 44,000 BTC in its possession at the end of September.
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The use of the Metaplanet Convertible Bonds would enable the company to solve its current debts and obligations rather than directly increasing the Bitcoin position. This comes from the update of the capital strategy by the company on October 5.
According to the updated capital strategy, the company seeks to maintain Bitcoin collateral borrowings within 10% of the net asset value of its Bitcoin position. However, at the moment, as of September 30, the company had borrowed about 17.7% of the Bitcoin position.
A reduction in the Bitcoin price would make this difference quite worrying since, as the value of the collateral Bitcoin decreases, the amount of borrowing becomes a significant portion of the asset value left.
Part of the capital raised by the company Metaplanet will be used for repayment of debts in order to reduce the level of leverage to its desired levels.
It clearly shows that Metaplanet prefers to manage its balance sheet rather than increase its treasury. Moreover, this strategy is consistent with its attempts to get a credit rating and get longer-term finance. With improved finances, the company can explore other sources of funds.
From the October 13 filing, the company intends to allocate the funds raised to paying debts and buying back shares.
The amount to be used for debt repayment is ¥23.6 billion, while the funds used in repurchasing the shares could amount to ¥28.3 billion in the months of October through December.
On September 30, Metaplanet had borrowed approximately $650 million out of the total amount of $800 million that was made available to the firm through the credit arrangement using Bitcoin as collateral.
Making payments for outstanding loans would mitigate Metaplanet’s debt financing risks and increase its liquidity in the case of price drops in Bitcoin.
Additionally, Metaplanet intends to buy back up to ¥25.3 billion worth of its shares through the ToSTNeT-3 system on October 14 at the Tokyo Stock Exchange. The buyback will include 97.94 million shares, which accounts for about 7.1% of outstanding ordinary shares.
Metaplanet discontinued its share repurchasing program scheduled until October 2025 and authorized a new program with a total value of up to ¥60 billion.
Share buybacks of Metaplanet may result in higher Bitcoin per share if the number of shares declines but the BTC reserves of the company stay at the same level.
It will give shareholders additional indirect exposure to the Bitcoin reserve of Metaplanet. Nevertheless, share buybacks do not ensure a higher share price since it depends on valuation, liabilities, and costs associated with repurchases.
The Metaplanet Convertible Bonds are zero-coupon euroyen bonds that allow conversion of debt into equity shares under certain conditions.
This bond issuance was handled by Merrill Lynch International and focused on European and Asian investors while excluding the US.
Every ¥10 million bond carries 5,200 stock purchase rights. This bond is subject to maturity on October 29, 2031, and closes on October 29, 2026. Conversion is allowed from November 12, 2026, until October 15, 2031.
Metaplanet may also recall the bonds before maturity starting from October 29, 2029, if the company’s stock hits the specified level. Investors can also ask for early repayment at face value on that date.
The bonds do not require interest payments, but Metaplanet is responsible for their repayment and conversion under the agreement.
Metaplanet Convertible Bonds offer instant capital but might increase the shares outstanding due to conversion by bondholders.
Thus, there is a tradeoff between stock buyback and the prospect of dilution in the future. The outcome will be a function of the number of shares bought back, bond conversions, and the conversion price.
Both Bitcoin holdings per share and share dilution must be taken into account by investors. The success of the approach will ultimately depend on the management of debts and transactions.
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