Recently, Metaplanet, a highly regarded Japanese listed company, has been dubbed "Japan's MicroStrategy" for incorporating Bitcoin into its treasury assets. The company recently announced a controversial yet eye-catching financing plan—issuing zero-coupon bonds. The amount raised through these bonds reached 4.5 billion yen (approximately 30 million USD), aimed at further increasing its Bitcoin holdings. According to Aiying, since adopting Bitcoin as its treasury reserve asset in May 2024, Metaplanet has purchased over 1,000 BTC. Additionally, since January 2024, Metaplanet's stock price has surged by 2,450%. Amid the volatility of cryptocurrencies and high-risk financial instruments, this operation not only brings high-return fantasies to the market but also carries unsettling potential risks. Aiying Fundinsight will break down some of the operational logic behind this:

I. How Do Bitcoin Strategy and Zero-Coupon Bonds Work Together?

Metaplanet's financing is accomplished through zero-coupon bonds. These bonds do not pay interest, and investors' returns come from purchasing the bonds at a price below face value and receiving the full amount at maturity. For example, a bond with a face value of 100 yen might be issued at 90 yen, and upon maturity, the investor receives 100 yen, earning a 10 yen difference.

For the company, this type of bond financing has extremely low costs. There is no interest pressure, and no periodic payments are required; the only burden is repaying the principal at maturity. However, Metaplanet has not used the raised funds for regular business operations but has instead bet everything on Bitcoin, a highly volatile asset.

Since May 2024, Metaplanet has purchased over 1,000 Bitcoins. This strategy of using Bitcoin as a treasury reserve asset learns from MicroStrategy's high-leverage Bitcoin purchases: [Thought] From 1.8 billion to 111 billion: How MicroStrategy Drives Market Value Growth through Bitcoin and Capital Leverage, becoming an important corporate representative in the cryptocurrency field. Metaplanet believes that Bitcoin has long-term appreciation potential, can combat inflation, and as a scarce asset, its value is expected to rise with increasing market demand.

However, the risks of this strategy are evident. If Bitcoin's price drops significantly, the value of the assets held by Metaplanet will plummet, while the fixed principal amount must still be repaid at bond maturity. If the market value of the assets cannot cover the debt, the repayment gap will become a huge problem.

II. How Does the Leverage Effect Manifest in This Game?

Metaplanet's bond financing plan is essentially a leveraged operation. The company uses low-cost debt to leverage Bitcoin, a potentially high-return asset, hoping to repay the debt at a higher value after Bitcoin appreciates and retain profits.

For example, suppose Metaplanet uses the 4.5 billion yen bond funds to purchase Bitcoin at an initial price of 3 million yen per coin, acquiring a total of 150 BTC.

• Optimistic Scenario: If Bitcoin's price rises to 4.5 million yen per coin, the total market value of the BTC held by the company becomes 6.75 billion yen. After repaying the 4.5 billion yen bond principal, there is still a net gain of 2.25 billion yen, and the leverage operation is successful.

• Pessimistic Scenario: If Bitcoin's price drops to 1 million yen per coin, the total market value of the BTC is only 1.5 billion yen. At this point, the company not only has no profit but also needs to raise an additional 3 billion yen to repay the debt, significantly increasing financial pressure.

This leverage strategy amplifies the results brought by Bitcoin's price volatility: profits double when prices rise, while risks multiply when prices fall.

III. Repayment Pressure: A Dual Test of Bitcoin Prices and Cash Flow

Although zero-coupon bonds do not have interest expenses, the obligation to repay the principal at maturity is fixed. For Metaplanet, its ability to repay is challenged by both Bitcoin price fluctuations and the management of company cash flow:

1. Bitcoin Price Volatility

Metaplanet has invested all bond funds into Bitcoin, meaning its repayment ability is highly dependent on Bitcoin's price performance. If the price drops, the market value of the Bitcoin held by the company may not be enough to cover the 4.5 billion yen debt.

For example:

• If Bitcoin's price drops significantly to 1 million yen per coin at the bond's maturity, the market value of the 150 Bitcoins held by the company would only be 1.5 billion yen, facing a funding gap of 3 billion yen.
• In this case, the company may need to sell other assets, use operational cash flow, or even issue new bonds to fill the gap. This would significantly increase its financial pressure and could raise market concerns about its repayment ability.

2. Liquidity of Cash Flow and Refinancing Ability

If the company's Bitcoin assets cannot be liquidated in time, or if there is insufficient liquidity in the secondary market, the company may face a "cashless" dilemma at the time of repayment. Additionally, if the market questions Metaplanet's credit rating, refinancing difficulties will significantly increase.

Currently, according to Aiying, Metaplanet has not publicly disclosed the specific credit rating of its bonds, but its bond guarantee arrangements show a certain level of repayment assurance—establishing priority mortgages through real estate (such as land and buildings) held by subsidiaries, allowing bondholders to receive some compensation in the event of default. However, this guarantee can only cover part of the debt and does not completely solve the problem.

IV. Investor Perspective: How to View This Game of Risk and Return?

For bond investors, Metaplanet's zero-coupon bonds are full of opportunities but also hidden risks:

Credit Rating and Market Confidence

Credit ratings and market confidence are core concerns for investors. Although Metaplanet's debt issuance provides asset guarantees, investors need to remain cautious about its repayment ability in the absence of a specific rating.

Core Variables of the Bitcoin Market

The value of Metaplanet's assets is closely related to Bitcoin prices. If investors believe Bitcoin will continue to rise in the future, this bond will be a relatively safe choice; conversely, the uncertainty of Bitcoin prices will become the biggest risk.

Potential Returns and Default Risks Coexist

Although zero-coupon bonds do not have interest payments, the returns between face value and issue price (for example, purchasing a bond at 90 yen with a face value of 100 yen) need to be weighed against the potential default risk.

V. Conclusion: Dancers on the Edge of a Knife Under High Leverage

Through the financing operation of zero-coupon bonds, Metaplanet showcases a highly adventurous investment strategy: using low-cost funds to bet on the future value of Bitcoin. Its logic is clear and exciting—if Bitcoin prices continue to rise, the company will easily profit, and shareholders and investors can enjoy the appreciation dividends of crypto assets. However, at the same time, the extreme volatility of Bitcoin may also lead to painful consequences for this adventure.

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 chasing high returns, how to control risks and diversify investments will be the wisest strategy.

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