Japanese publicly traded company Metaplanet is planning to purchase Bitcoin as a means of transformation, attempting to create an Asian version of MicroStrategy. In a joint article written by the media outlet Guokr and Silicon Valley Uncle KC, the reasons behind this decision and Metaplanet’s ultimate goal are explained.
Metaplanet, a publicly traded company listed on the Tokyo Stock Exchange, has been heavily impacted by the COVID-19 pandemic. Its hotel business suffered a devastating blow, leading the company to announce a change in its financial management strategy in April this year. Metaplanet has adopted Bitcoin as a strategic reserve asset.
Since April this year, Metaplanet has purchased 137 Bitcoins (approximately $10 million). This strategy seems similar to that of MicroStrategy, a US-listed company, which has acquired over 200,000 Bitcoins as company assets. However, Metaplanet’s adoption of Bitcoin is not for the same reasons as MicroStrategy.
In an era of high government debt and rapid currency devaluation, maintaining the long-term value of cash holdings is a challenge for every company. For example, the US dollar has increased its supply at an average annual rate of about 7% over the past century. The depreciation rate of different currencies varies depending on their monetary policies and fiscal discipline. If a company’s growth cannot surpass the increase in currency supply, it is essentially experiencing negative growth from a capital perspective.
MicroStrategy adopted Bitcoin as a reserve asset in 2020 when it became a publicly traded company for the first time. It then embarked on a series of financial leveraged operations to increase its Bitcoin reserves, aiming to solve this problem and enhance the company’s competitiveness. Since adopting the Bitcoin strategy, MicroStrategy’s stock performance has significantly outperformed major tech companies, the S&P 500 index, gold, and bonds.
The difference is that MicroStrategy has a profitable core business, while Metaplanet does not. Metaplanet’s core business is weak. It was established in 1999 as Red Planet Japan Inc., a listed company in Tokyo. It used to operate in the tourism and hotel industry and had stable revenue growth. However, since 2019, it has been severely affected by the COVID-19 pandemic, resulting in a devastating impact on its hotel business. The stock price and revenue plummeted to a low point, with a 99.73% decrease from its peak in 2019.
Due to the impact of the pandemic, Red Planet Japan’s revenue rapidly declined from its peak of 2.5 billion yen in 2019 to 7.84 million yen. It then began a transformation by disposing of loss-making businesses related to hotels and cutting its overseas (Thailand) operations. This led to a decline in revenue year by year, with only 2.61 million yen remaining in the fiscal year 2023. The number of employees also decreased by 90%, leaving only 17 people. It can be said that the company is gradually transitioning into a shell company.
Metaplanet, formerly known as Red Planet, attempted to shift its business focus to Web 3 and metaverse technologies, including projects such as “WEN Tokyo,” “Takumi-X,” NFT trading platforms/investment businesses, and hotel brands. It achieved some success in 2022 by turning losses into profits. However, with the continuous weakness in the NFT market, it proved that the Web 3 transformation could not save the company.
Now, Metaplanet’s strategy is not limited to the metaverse. Its main strategy is to prioritize Bitcoin, adopt Bitcoin as the company’s sole asset, and use long-term bonds and periodic stock issuances as strategic financial choices to continuously accumulate more Bitcoin, rather than holding the increasingly weak Japanese yen.
Metaplanet’s advantages in this strategy include:
1. Hedging against currency devaluation: With the continuous weakening of the Japanese yen, Bitcoin provides an absolute neutral value storage method. Compared to traditional fiat currencies, it has the potential to resist inflation and continue to appreciate in the future.
2. Speculative arbitrage in the capital market: Utilizing extreme opportunities in the Japanese capital market, Metaplanet plans to use existing cash reserves, cash flows generated by assets, and low-cost funds with near-negative interest rates to strategically arbitrage by issuing long-term yen bonds, continuously acquiring Bitcoin when opportunities arise.
3. Becoming a Bitcoin carrier: Although there are various ways to adopt Bitcoin globally, including directly holding Bitcoin spot and financial products such as ETF/ETP, Metaplanet aims to become a Bitcoin reserve carrier for an Asian publicly traded operating company, providing global investors with an option and the lowest-cost way for institutional investors to hold Bitcoin.
4. Favorable tax system: Additionally, for individuals in Japan, tax calculations are based on realized gains as miscellaneous income, with the highest tax rate reaching 55%. However, the tax environment for listed stocks/securities is significantly lower, with a realized stock profit tax rate of only 20%. In the past, Japanese tax law imposed taxes on unrealized cryptocurrency gains. However, due to the upcoming amendment to Japan’s cryptocurrency tax regulations, holding Bitcoin as a company asset (unsold) will not be subject to taxation.
Furthermore, thanks to Metaplanet’s past business losses, it currently has over 10 billion yen in “tax loss assets,” which can be used to offset realized gains when needed.
This strategy, similar to MicroStrategy, aims to increase the per-share Bitcoin-based earnings and support the long-term shareholder value of the company.
In simpler terms, it allows the company’s stock to become a carrier of Bitcoin, providing the simplest way for institutional investors in Japan to indirectly hold Bitcoin.
Metaplanet announced on May 13, 2024, that there are three reasons for choosing Bitcoin as its sole strategic asset:
1. Bitcoin is inherently superior to any form of fiat currency, traditional value storage, investment tools, and all other cryptocurrencies/securities.
2. Bitcoin is a global, absolutely scarce digital native currency with no single issuing institution.
3. Bitcoin’s monetary policy is strictly set until 2140, making it significantly different from monetary metals and other cryptocurrencies operated arbitrarily by centralized teams. The total supply of Bitcoin will always be limited to 21,000,000.
Metaplanet strategically expands its Bitcoin reserves, not only strengthening its balance sheet and resisting the continuous devaluation of the Japanese yen but also making it a global Bitcoin-centered investment platform. I believe this is an incredibly smart decision.
It is only a matter of time before Taiwan, South Korea, and other Asian countries follow suit. We are eagerly waiting to see which will be the first Taiwanese publicly traded company to adopt Bitcoin.