Discover how Metaplanet became the top global stock by adopting Bitcoin as treasury asset. CEO Simon Gerovich shares strategies, valuation insights, and future plans for non-financial audiences.
Timestamped Overview
[00:00:00 - 00:03:15] Optimism for Bitcoin Treasury Companies
- Bitcoin treasury companies are like businesses that save and grow money by holding Bitcoin, a type of digital currency that’s becoming popular worldwide.
- More companies are starting to use Bitcoin as a safe way to store value, making it easier for regular people and big investors to get involved without buying Bitcoin directly.
- Big investors, like banks or funds, couldn’t easily invest in Bitcoin before, but now these companies provide a simple way for them to join in.
- In places like Japan, where savings earn very little interest, people are excited about new ways to grow money through Bitcoin.
- The host introduces a podcast series on these companies, highlighting how Metaplanet turned a small struggling business into a huge success in just over a year by focusing on Bitcoin.
[00:03:16 - 00:05:17] The 555 Capital Raise Plan
- Metaplanet announced a big plan called “555” to raise money, which means “go, go, go” in Japanese and is fun with numbers that people like.
- This plan aims to almost double the company’s shares to buy more Bitcoin, making Metaplanet one of the biggest holders of Bitcoin globally.
- They raised money by letting thousands of everyday people buy shares directly, turning them into supporters who help the company grow.
- The number 555 was chosen because it was successful in a past fundraiser and fits with Japanese love for lucky or meaningful numbers.
- The goal is to have enough money by the end of the year to keep buying Bitcoin and expand the business.
[00:05:45 - 00:11:45] Moving Strike Warrants for Fundraising
- In Japan, companies can’t easily sell new shares like in the US, so Metaplanet uses a tool called moving strike warrants to raise money fairly without hurting share owners.
- This method lets them sell shares at good prices, sometimes even higher than normal, to bring in cash for buying Bitcoin.
- They’ve done this three times successfully, raising hundreds of millions of dollars quickly because there’s a lot of interest in their stock.
- Unlike past uses where this tool hurt companies, Metaplanet makes it friendly for everyone involved, avoiding big losses.
- Their partner, Evo, helps by buying shares in a trustworthy way, building on a long relationship that started years ago with smaller deals.
[00:12:31 - 00:14:23] Bonds and Consistent Bitcoin Buying
- Metaplanet issues special loans called zero-coupon bonds to their partner Evo, which are like advance payments with no extra cost, to buy Bitcoin even when share prices are low.
- This helps them keep buying Bitcoin steadily, no matter if the stock market is up or down, without waiting for good times.
- The bonds act like temporary money that can be paid back with new shares later, making it a smart way to grow their Bitcoin savings.
- It’s a win-win partnership because Evo trusts Metaplanet and both benefit from the company’s growth.
- This setup lets Metaplanet speed up buying Bitcoin, using it as a main way to raise money over time.
[00:14:23 - 00:23:39] Put Options Strategy for Extra Income
- Metaplanet uses a strategy called selling put options, which is like promising to buy Bitcoin at a set price later, earning extra money as a reward if the price stays high.
- It’s not about protecting against losses but a positive bet on Bitcoin growing, helping them make steady income to cover costs.
- They set aside a small part of their money (up to 5%) for this, expecting to earn $20-25 million this year, which is more than enough for their low expenses.
- A put option is like insurance for others who worry about Bitcoin prices dropping; Metaplanet sells this “insurance” and gets paid, using the money wisely.
- They’ve been doing this for about eight months, testing different timings and prices to get the best results, always buying Bitcoin quickly when they can.
[00:23:39 - 00:28:43] Preferred Shares and Yield Opportunities
- Preferred shares are like special investments that pay a steady return, and Metaplanet is exploring issuing them in Japan where people want better earnings than low bank interest.
- In Japan, there’s not much of this market yet, but with trillions in savings earning nothing, a Bitcoin-backed option could be very appealing at 3-5% return.
- Compared to the US where similar investments pay higher (8-10%), Japan’s low rates make even a small return exciting for investors.
- Metaplanet believes their simple setup with just Bitcoin as the main asset makes them a safer choice than complicated companies like SoftBank.
- They’re inspired by other companies proving demand for these investments, planning to grow their Bitcoin holdings first to make bigger deals.
[00:28:43 - 00:34:20] US Expansion and Investor Interest
- Metaplanet started a new office in Miami, Florida, because it’s friendly to digital money like Bitcoin and helps attract US workers and better buying options.
- The US has the biggest money markets, so being there lets them connect with more investors and buy Bitcoin more easily than in Japan.
- In Switzerland, big investors are surprisingly interested in Bitcoin companies, knowing they can’t buy Bitcoin directly but can invest in stocks like Metaplanet’s.
- These investors look for companies with good trading volume and size, and Metaplanet now fits, leading to positive talks.
- More Bitcoin treasury companies worldwide are helping everyday people and big funds get into Bitcoin safely.
[00:34:40 - 00:39:12] Views on MNAV and Future Growth
- MNAV is like a score showing how much a company’s shares are worth compared to its Bitcoin holdings; higher scores mean easier growth with less share dilution.
- Investors have different opinions: some buy when it’s high to bet on fast growth, others see value when it’s low.
- Metaplanet aims for a balanced range (3-6 times) to guide their money-raising, being more active when it’s high.
- They focus on growing Bitcoin per share, not just holding it, to show real progress.
- Overall, there’s excitement for more money flowing into these companies, offering ways for all kinds of investors to join the Bitcoin trend.
Notable Quotes
Bitcoin Treasury Definition
A Bitcoin treasury company has a single purpose and that is to acquire as much Bitcoin as possible, to accrete more Bitcoin onto the balance sheet on behalf of all shareholders.
Simon Gerovich @gerovich
Pivoting to Bitcoin
We were inspired by MicroStrategy in the US and we decided to adopt the same plan a little over a year ago after really looking at limited options that were available to us as a struggling hotel company.
Simon Gerovich @gerovich
Decision Process
I went through a very similar process that Michael Saylor went through and many people who have listened to his early podcasts would know that he went through this process of figuring out what to do with the cash on his balance sheet, worrying that those dollars would lose value with every minute that passes.
Simon Gerovich @gerovich
Bitcoin as Store of Value
After looking at literally every possible investment opportunity out there concluded that Bitcoin was the best asset to purchase and be something that stores value over the long term.
Simon Gerovich @gerovich
Company Background
We originally acquired the company when I was running a hotel business: we realized when we entered Japan that in order to get financing from Japanese banks, to be taken seriously by potential investors, to be a public company would be very useful.
Simon Gerovich @gerovich
Impact of COVID
Coming into COVID we were at the top of the world: prior to COVID we had grown our hotel platform to 30 hotels in Thailand, Philippines, Indonesia, and then Japan, and then literally with a single global health scare, health issue, we went from top of the world to struggling.
Simon Gerovich @gerovich
Future of Capital
You were the fastest growing company I think in the world last year in stock market returns — you did in 2024 2,400% if my data is correct — that puts you in the #1 position.
Richard Byworth @richardbyworth
Transcript
Simon Gerovich [00:00:00]: And so I’m feeling incredibly optimistic that more and more money will flow into Bitcoin treasury companies. I love seeing how many new Bitcoin treasury companies are popping up in every corner of the globe. It’s absolutely great for the industry and it’s great because finally there are companies that are able to provide access to individuals that in the past could not get access easily. But more importantly, institutional capital, which is where all the capital is. They haven’t been able to play the Bitcoin story. They haven’t been able to get exposure to Bitcoin. And finally, there is a mechanism for them to do so, and that is the Bitcoin Treasury Company.
Richard Byworth [00:00:38]: How are institutional
Simon Gerovich [00:00:40]: investors thinking about the Bitcoin treasury space? Now, the difference in Japan is it’s an absolutely yield starved country. Interest rates are incredibly low. The other prefs out there, SoftBank, I think is two and a half percent coupon. And these are just incredible amounts of capital all around the world that’s looking for, I think, exposure to Bitcoin. And it’s up to companies like Strategy, like MetaPlanet, other Bitcoin treasury companies to identify those pools of capital and offer them what they’re looking for. The equity side is really easy. as a first step, but then realizing that there are pools of capital that have different risk return objectives and to offer them and design them something which meets those requirements I think is the tremendous unlock.
Richard Byworth [00:01:55]: I’m extremely happy today to introduce a new sub-series of the Seize the Future podcast focused on Bitcoin treasury companies or BTCTCs. This topic is so extremely hot and often entirely misunderstood that I thought it merited deeper exploration. Two months ago, Simon Jerovich, CEO of Metaplanet, joined me to discuss what he’d done with his company. The video is extremely popular, and there were many more questions that have come back from our listeners across the world. So I thought, what better way to kick off the BTCTC subseries than with a part two with the man who transformed a $10 million failing Japanese hotel business into a $7 billion giant built on the future of capital in just a matter of 15 months. Simon joins us today to answer many of your questions, as well as some of the more technical aspects that we were unable to cover last time. Please enjoy. Simon, welcome back to Switzerland. It’s really great to have you here.
Simon Gerovich [00:02:54]: Thank you very much. It’s exciting to be here. I really enjoyed our last podcast together and looking forward to one today.
Richard Byworth [00:03:00]: Yeah, I think people really appreciate it. I think it was good. to have a proper understanding of many of the aspects of Mesoplanet. And I think there are many more that we didn’t get an opportunity to explore. So I think it’s really opportune to have you here for a part two.
Simon Gerovich [00:03:15]: Absolutely.
Richard Byworth [00:03:16]: Good. Well, look, one of the things you’ve announced recently is this absolutely massive capital raise, the 555 plan. Obviously, there’s an element of numerology there. I think 555 means go, go, go in Japanese. And actually all your capital raises, you tend to have some fun with the numbers around them. And yeah, maybe just explain where the 555 came from. And just for everybody to know, that’s 5.4 billion. You’re currently a seven-ish billion market cap. I’m assuming you’ve dug into some of that 555 already. Maybe just talk us through kind of where the number came from, where we are so far and in line with your plan for the end of
Simon Gerovich [00:03:59]: the year. Sure,
Simon Gerovich [00:04:00]: So the 555, as you correctly noted, is go, go, go in Japanese, which is a bit of a rallying cry. It also happened to be the rights issue price of our rights issue last summer. And that was an incredibly successful capital raise. We had almost 13,000 individual shareholders participate. filled out 10 pages of subscription documents and sent money directly to the company so that we could buy Bitcoin. And so for us, we think of that as a milestone for us, a very important time that we onboarded fans of MetaPlanet in a way that wouldn’t have been possible if they had just bought shares in the market. 555 was also very deliberate. It’s roughly a 90% dilution or so, so we wanted to roughly double our share count. We want to become the second largest holder of Bitcoin in the world, and that would give us roughly enough money to get to that point. Numerology-wise, Japanese absolutely love the numerology. I’m excited that the rest of the world seems to enjoy it as well. So we do our best to choose a number which resonates well. And 555 has now become that number in Japan that people really like. So we’ll do our best to have 555 included in as many of our future disclosures as possible.
Richard Byworth [00:05:17]: Good stuff. I think one of the things that we didn’t cover off properly was the way that you’ve very cleverly replicated the ATM that Sailor can do in the US. This is a dynamic that obviously any BTCTC needs to understand Bitcoin Treasury Company, or sorry, needs to be able to have a mechanism like this to be able to issue shares into the market to sort
Richard Byworth [00:05:45]: keep that MNAV in line with where the Bitcoin holdings are. So maybe can you just explain the moving strike warrants that you’ve been using, how it all comes together with Evo and you’ve iterated it recently as well to the benefit obviously of yourselves and the shareholders. So maybe just talk about that and the structure itself.
Simon Gerovich [00:06:07]: Sure, of course. And so the benefit of American companies, and I imagine companies in Europe as well, is they have the ability to issue shares at the money. The at-the-money equity offering is incredibly popular in the US, and it’s a great way for companies to raise money at the market price along with volume. And so Strategy and others, they work with brokers. They can sell new shares into the market every day. But that’s not something that we can do in Japan. And when we researched that last year to see what we could do as a way to efficiently raise capital, we realized that wasn’t possible. So we looked at the various forms of capital raising, which are popular in Japan. And the moving strike warrant is something that small and medium cap companies have generally employed as a way to raise capital. Generally, it’s used for companies that are in a bad state. And so they’ll go to a traditional broker. The broker will say, I’m taking risk here. I want to buy shares at a 8% to 10% discount. And so generally, deals in moving strike warrants are very dilutive. They’re not good for shareholders. And the discounts are massive, 8% to 10%. We thought there was an opportunity to use the structure, but do so in a shareholder-friendly manner. And so we have now done three moving strike warrants. Our first one was a small one in December last year. We raised about 65, $70 million over the course of five trading days. And so that was great. It showed us that there is demand and volume and liquidity for us to be able to do so efficiently. We then, at the beginning of this year, announced our $210 million plan. It was the $21 million plan, but after the stocks split, it became the $210 million plan. That, we raised almost $700 million over 60 trading days. Again, testament to the amount of volume, interest, and liquidity that the stock has that can easily absorb that amount of capital raising. And then finally, we now are in our current plan, the 555 million plan, which is the largest single moving strike warrant transaction in Japanese capital market history. And it’s also done on the most shareholder friendly basis. And so the one at the beginning of the year, the 21 million plan was issued at a 0% discount. So again, put that in context with the 8 to 10% discount, which is normal in the market. This particular one, the largest ever issued in Japan, is now at a premium. And so there’s three tranches. Tranche one is a 0% discount. The next tranche is a 1% premium. And the last tranche is a 2% premium. So on average, we’re going to be selling shares at a 1% premium to the reference price. And that’s us being able to retain a lot of value for ourselves and for shareholders, which makes a big difference. And so that’s, I think, an exciting, unique way for us to raise capital efficiently in Japan using a tried and tested fundraising method.
Richard Byworth [00:09:02]: Yeah, I don’t know if we mentioned it on the last podcast, but we used to call these death spiral warrants or death spiral CBs because they were often done as CB structures as well, convertible bonds. And as you say, they were absolutely for desperate companies that had no other way of raising capital. And so their stock price would get absolutely hammered because people would sell into the close and then basically manage to buy them back at that price.
Simon Gerovich [00:09:30]: I think the important distinction with those is that there’s typically No floor. And so as the company raises capital and the financing partner is selling shares, it has this death spiral.
Richard Byworth [00:09:45]: Yeah.
Simon Gerovich [00:09:45]: In the case of our warrants, there is the ability also for us to pause. And so, you know, we’re able to look at MNAV. We’re able to look at our liquidity and, you know, the volumes and the share price and also make an assessment about whether or not our financing partner, in this case, Evo, exercises more quickly or exercises more slowly. So we have that flexibility to ensure that we can guide the market towards a reasonable MNAV.
Richard Byworth [00:10:13]: Yeah, I think we should probably just also highlight that a little bit is how Evo operates because I’ve known Mike Lurch for many years as well and I think he’s someone that really understands partnership and I think that’s probably why you’ve chosen uniquely them because that allows you to have some oversight in terms of what he’s doing, and you’ve not got some spivvy hedge fund destroying your stock and mucking around with the share price. You’ve got Ivo, who you too, I’m sure, know Mike as long as I have, because he’s been so active in Japan since even, I think, the 90s. He set up his first hedge fund.
Simon Gerovich [00:10:54]: We’ve had a long lasting relationship with Michael Lurch and with EVO fund. Even as the company, we did a financing transaction with EVO fund back in 2019. We raised I think at that time about 500 million yen to call that three and a half million dollars, which at that time was a lot of money for us. But now, you know, pales in comparison to the size of the transactions that we do now. But it’s been a result of a long-lasting trust-built relationship. And this is the third moving strike warrant that we’ve done. And the first two were executed impeccably. And so I have great confidence that the 555 plan will execute smoothly over the coming months. And we’ve now executed roughly, I think, 14% of the plan that’s raised us about $700 million. And so the pace of our ability to raise capital is really accelerating.
Richard Byworth [00:11:45]: That’s fantastic. Okay. I didn’t realize you were already that far, far into it. Yeah. Good. Okay. Well, look, I think the other thing that I even struggled to understand was the link between what you’re doing on the fixed income side with Evo and that zero coupon bond in relation to the moving strike. So my assumption had been that was entirely utilized when you had this moment where you’re waiting for approval from the JSDA or JSFC and having to wait until you’re allowed to issue more shares. But maybe just explain the various different reasons that you do these bonds.
Simon Gerovich [00:12:31]: Sure. And so generally, shares are exercised as part of the moving strike warrant when the share price is up. And those are the times when you’re able to sell some shares, exercise, raise capital. There are obviously also times when the share price is down. The stock is volatile, stocks go up, stocks go down. And we want to be able to consistently buy Bitcoin over time. And so the bonds that we issue are really to facilitate purchases of Bitcoin when the stock is on down days and when the stock is on up days, Evo is able to exercise and they can subscribe for those new shares with cash and also offset with bonds. And so I think last week there was an exercise or two weeks ago and it was partially subscribed to with cash and partially subscribed to with bonds. What’s great is that these are zero coupon bonds with no collateral, no guarantees. Think of them really as an advance against future exercise. So I think of them more as quasi equity than debt. But I think there’s very few financing partners out there that are willing to extend zero interest loans. And that’s the nature of this symbiotic relationship that we have with Evo.
Richard Byworth [00:13:42]: And again, I would just point people to that. It’s very unique. That partnership that you have with Evo, it’s one of trust, but it’s also mutual benefit. I think that always is the best thing in partnership when it’s win-win, right? So that’s great. And also
Simon Gerovich [00:13:57]: great for the company, great for shareholders has really enabled us to accelerate our Bitcoin purchases.
Richard Byworth [00:14:02]: Yeah.
Simon Gerovich [00:14:03]: And so it’s something that I think we always want to have bubbling in the background. So always have moving strike warrant in the same way that strategy has the ATM facility, which they can call on from time to time depending on market conditions. But it will be a significant source of capital raising for us over time.
Richard Byworth [00:14:23]: Fantastic. So one of the things that I’ve always said that I love about Metaplanet is obviously your derivative background and using the put underwriting strategy. For those viewers who don’t really understand what that is, could you just really break it down in a very basic way what you’re doing and how you’re doing it and what even is a put,
Simon Gerovich [00:14:48]: right? Right, sure. There certainly are some common misconceptions. Some people think that what we’re doing is hedging and it couldn’t be further from the truth. We are incredibly bullish Bitcoin and what we do is effectively selling put options and selling a put option is an obligation to buy Bitcoin at some point in the future. It’s a bullish position. One must buy Bitcoin if the price falls below the exercise price. And so for us, we think of this as a way to capitalize.
Richard Byworth [00:15:19]: I’ll stop you just to say, could you just give an even more basic explanation of what a put option is for the viewer that really doesn’t quite get it yet? And so how you’re using that function to generate premium.
Simon Gerovich [00:15:34]: Sure. So a buyer of a put option typically does that as a way to hedge. It’s sort of an insurance policy. So if they own a basket of stocks and they buy a put option, that gives them protection below the exercise price. That’s the more understood way that a put option is used. In our case, we sell a put option. And people are bidding up for these put options because they want protection. We’re using it as a way to affect the bullish view. And so Bitcoin implied volatility is a certain level that enables us when we sell the put option to earn premium. It’s a premium that we can book as revenue and retain on the balance sheet. And when Bitcoin falls, we’re obligated to buy the Bitcoin. When Bitcoin goes up, then we get to keep the premium that we’ve earned from selling it. And so for us, we look at this as a way to generate stable income. We look at it as a way to affect the bullish view. I think some criticism has been if you have cash and you don’t buy Bitcoin, you’re selling a put option. Is that is that not being kind of max bullish? The reality is when you sell a put option, you’re taking on the delta worth of exposure and you’re getting longer and longer as if Bitcoin were to fall. But most importantly, it’s to generate a stable source of revenue. And our approach is that the majority of the money that we raise goes productively into buying Bitcoin, but a portion of it, up to 5%, we put aside for our Bitcoin income generation strategy. That’s projected to make us this year 20 to 25 million dollars. Our operating costs are really low, which basically means that we’re very profitable with just a small portion of our capital allocated to the Bitcoin income generation strategy. And so I would say it’s a bullish view. We love Bitcoin and we’re long Bitcoin, but this is a way that we can get paid to buy Bitcoin.
Richard Byworth [00:17:34]: But you’re collateralizing it with cash, right? And so obviously, if you were to be max bullish, you could potentially collateralize it with the pristine collateral that you have on your balance sheet. And with that functionality that we just discussed with Evo providing you a lending facility should you need it, Why not just do it with Bitcoin as the collateral? Why not just say, okay, we’re going to take a portion of the Bitcoin, we’re going to use that as collateral, we’re going to underwrite puts with it, and then take the premium in Bitcoin as well, because I think you take it in dollars or yen. And then that way, if you ever do have to buy the Bitcoin and you’re not able to do the ATM structure and the moving strike, then you could just borrow from Evo at that zero rate. So maybe just
Simon Gerovich [00:18:29]: talk
Richard Byworth [00:18:30]: about how we step it up a bit in
Simon Gerovich [00:18:32]: terms of aggression. There’s various levels of risk that one can take. I think our approach until now is to be as risk averse as possible. As far as encumbering our balance sheet is concerned, we really want to have a pristine balance sheet of Bitcoin and not touch that, not encumber that, not borrow against it. And everything we do is at the balance sheet level. We issue equity securities. I’m hopeful in the future we issue fixed income securities. But the chance of being able to do that effectively is a function of how pristine your balance sheet is. I worry about borrowing against our Bitcoin. I can bring our Bitcoin because that just means that during inevitable no down cycles, you want to be able to say, well, you know, we’re completely safe. We don’t have to sell our Bitcoin. And so that’s sort of the approach. But I hear you. Is there a way to optimize the strategy a bit more? We do have financing capability through Evo, through the straight bonds. I think in time, we can negotiate trade finance agreements with various partners that we have that can provide us with short-term capital. And so maybe we could sell some sell more puts. And then if the market falls and we have to purchase that Bitcoin, then we can source that capital from somewhere. There’s always a way to optimize, obviously, to the nth degree. But I think the overriding consideration is, you know, wanting to ensure that our pristine capital base of Bitcoin is on encumbered, and maybe do a bit more of the fancy stuff at the balance sheet level through the issuance of securities that are backed by the pristine capital.
Richard Byworth [00:20:11]: Okay, so just talking about optimization within that strategy as well. Obviously, you’ve been you’ve been playing with it now for how long have you been doing the put underwriting?
Simon Gerovich [00:20:21]: From November, December last year.
Richard Byworth [00:20:24]: Okay. So yeah, what is that eight months or so? So yeah, you’ve been running put underwriting for eight months, I guess you’ve optimized to the strikes and tenors. What? Where are you finding the most juice at this particular point in time for for your put underwriting?
Simon Gerovich [00:20:41]: Well, without wanting to reveal too much alpha, because I think our competitors may be keen to employ a similar strategy. Every time we raise capital, we have two options. Obviously, the majority goes to just buying Bitcoin at spot price. I’m often asked, do we wait to purchase? Do we hold our cash to purchase in the future? Absolutely not. We purchase Bitcoin as quickly as we possibly can. And we don’t want to carry a cash balance that is too significant. So I would say that the put options that we sell are effectively at the money. And that’s the same as just buying Bitcoin. So it’s no more risky than buying Bitcoin because you’re selling it at the money option, but you’re being paid significant premium, being paid to buy Bitcoin. We’ve been experimenting a bit with maturities. Selling 12 one-week options, you can make more revenue than selling one 12-week option.
Richard Byworth [00:21:40]: Yeah.
Simon Gerovich [00:21:41]: And so experimenting a bit with the maturities is something that we’re looking at to maximize the amount of premium that we can earn.
Richard Byworth [00:21:48]: Yeah. Okay. And I guess the market changes. We’ve obviously just seen a quick up and down in Bitcoin price. And so that will increase volatility and potentially change the view of term structure or SKU that makes most sense. So yeah, when we think about the strikes that you’re selling at, it’s at the money or is it often slightly in the money? How are you doing that?
Simon Gerovich [00:22:16]: So typically the strikes are thousand dollar increments and so we choose the strike which is closest to at the money. So sometimes it’s slightly in the money because the closest strike is slightly in the money. But generally the approach is sell something that is at the money.
Richard Byworth [00:22:32]: Okay. Perfect. Nice. I think You guys are unique. I don’t think anybody is doing this. I mean, you jokingly said that maybe some people would look to replicate this strategy. But I think that the majority of CEOs in this space are not derivative people. And so that just gives them a caution.
Simon Gerovich [00:22:55]: It definitely feels like second nature. I like to think back at the most exciting career that I had, which was really at Goldman Sachs when I started. And then since then, I went on this detour, became a real estate developer that, for better or for worse, I sometimes feel rather regretful that I went down that path. You know, the difficult times, I think, brought us to this point. If it wasn’t for the difficulty for our hotel business, we wouldn’t have the public company today that we were able to pivot. I do think back fondly to my derivatives trading days. And so now being able to take that knowledge and apply it to Bitcoin and apply it to a revenue generating strategy for MetaPlanet, I think is very rewarding and I’m very happy for it.
Richard Byworth [00:23:39]: It’s nice how life comes full circle and helps you utilise all of those previous skills. So I think the question on everybody’s mind is prefs. I think obviously, you know, Sailor intimated I think in Prague that he’s not going to be able to get to Japan’s pref market as quickly as he’d like. He’s been extremely effective in breaking into various different types of capital pools that look at prefs. Maybe you could just give us a little bit of a viewpoint of the Japanese pref market versus US, but also the hunger for yield that there is in Japan and where you think that maybe coupon rate would be achievable in a PREF in Japan.
Simon Gerovich [00:24:29]: Well, first off, the exciting thing about Michael Saylor and what he’s done in the US is he’s really managed to prove now to the world that there is demand for different types of fixed income instruments. The fact that a company that’s backed by Bitcoin is able to compete in the fixed income market, transform the fixed income market is truly, truly special and exceptional. Obviously, it is inspiring us in Japan to look at the market there to see if there’s a similar opportunity. In terms of timing, it’s important that we have a larger, bigger balance sheet of pristine capital. And now we have approximately $2 billion of Bitcoin. And so to want to issue a significant sized preference equity, we would, I think, need to have some more Bitcoin. We’re working really hard now to grow our Bitcoin reserves. The Japanese preferred equity market is basically non-existent. There are four listed PREF issuances right now. Two are issued by SoftBank. I think the total size is something like $3 billion. And when you compare that to the PREF market in the U.S., U.S. I think is something like $120 or $130 billion. Now, the difference in Japan is it’s an absolutely yield-starved country. Interest rates are incredibly low. The other prefs out there, SoftBank, I think is 2.5% coupon. And Japanese investors, I think, would die to have a structure that can earn them a yield which is more attractive than what they’re getting in the bank now. In Japan, I think there’s still $8 trillion, $8 trillion plus of household savings. This is cash sitting in personal bank accounts, earning nothing. The Japanese have encouraged now through their NISA program, the Nippon Investment Savings Account, for people to move assets from savings into investment.
Speaker C [00:26:22]: We’ve
Simon Gerovich [00:26:22]: been lucky to be a prime beneficiary of a lot of investment in individual NISA accounts. People have bought MetaPlanet in a tax-efficient manner through their NISA accounts. But I think there’s a whole universe of Japanese investors who would like Bitcoin exposure, but they don’t want the ups and downs of an equity investment. And so if there was a way to purchase a fixed income security issued by a company backed by Bitcoin that generates a decent yield, I think that would be incredibly interesting and exciting for them. And so on your question about coupon, I think, you know, in the US, if strategy is issuing at kind of eight to 10% coupon level, in Japan, it would be three and a half, four percent, maybe five percent. There’s certainly no higher than that.
Richard Byworth [00:27:09]: Yeah, I think obviously the JGB market has moved probably since SoftBank issued that two and a half cent coupon. So I think, yeah, probably have to be a high level. And I think I think you’re right. Maybe four or five makes
Simon Gerovich [00:27:21]: sense. This may be a controversial statement, but I think that MetaPlanet’s credit is better than SoftBank’s credit. We have $2 billion of pristine capital unencumbered, whereas a lot of other companies that may have a longer track record have confusing balance sheets. They have lots of assets which may or may not be able to be valued fairly. They rely very heavily on traditional financial models and cash flow. you know, requirements for profit and paying large numbers of people. Our balance sheet is very simple to understand. It’s not confusing at all. It’s one asset. It’s Bitcoin. And I can’t think of anything better than that to be on one’s balance sheet.
Richard Byworth [00:28:01]: Yeah, it’s your point. I don’t think there is a more confusing balance sheet in the world than Softbank, probably.
Simon Gerovich [00:28:06]: So if they can borrow at two and a half percent, then maybe we can borrow at a level that’s not too far from that.
Richard Byworth [00:28:11]: Yeah, definitely. I think, obviously, the rate environment has moved in Japan recently, as people have become a little bit more concerned. The question I also wanted to ask you about was the US. So you’ve recently incorporated in Miami. I’d love to understand what that’s all about. So maybe you could just give us an explanation of why. Why there? Why Miami? And why the US?
Simon Gerovich [00:28:43]: Sure. Well, the US obviously is the world’s largest and deepest capital market. And we want to be close to the US and have a presence there. We also have a lot of people that would want to join us and work for MetaPlanet. And so we’re seeing a lot of inbound interest from US individuals that would like to work for MetaPlanet. as appealing as it is to move to Japan and as convincing as I try to be, I think, you know, an ocean too far, you know, for them. And so being in being in the US makes sense. We want to plug into the best liquidity for buying Bitcoin. And I think we’ve reached a bit of a limitation in Japan. So generally, we buy on we have bought on local exchanges. But there’s an interesting dynamic now that Japanese individuals, I believe, are trading less now on exchange because the more enjoyable way to get exposure to Bitcoin and trade on a daily, weekly, monthly basis is actually trading meta planet stock. And so our volumes have gone up and the volumes on exchange have gone down. And we are feeling the impact of not being able to purchase as much Bitcoin on an exchange. And so wanting to plug into more liquidity, sign up with the best service providers in the US, it was imperative to have a US subsidiary. We looked across all 50 states. We did an analysis through our lawyers and tax advisors on the state that was the most friendly to digital assets. And the conclusion we came to was that it was Florida. And I had a lovely opportunity to meet with Mayor Suarez on my last trip after the Bitcoin conference in Vegas. And, you know, he’s a wonderful gentleman and he talked very convincingly about Miami as a home for us. And our plan is to set up an office there and to have a number of people work out of the office there and help us with our US growth plans.
Richard Byworth [00:30:45]: Lovely. As you know, my final question is, is normally about capital allocation. But since we’ve had you on the show so recently, and I’m pretty sure you can say Bitcoin all the way again. And I had another question for you. Just because you’ve been in Switzerland visiting investors, I find it very interesting to understand how are institutional investors thinking about the Bitcoin treasury space? You’ve obviously got capital as your second largest shareholder. It feels like MetaPlanet is already at the stage of institutional investors, maybe give people an understanding a little bit how these institutions are thinking about players in your space and what their limitations are to participate as well.
Simon Gerovich [00:31:33]: And so I’ve had the opportunity now to spend time in both Geneva and Zurich, Zurich this week. And I have to say that I’m very pleasantly surprised. I have done capital raising for our hotel business in the past, and I’ve been to Switzerland on multiple occasions. And it was always the most difficult place to raise capital. The impression is that Swiss institutions are incredibly conservative, not very forward looking. And so I approached these meetings in a very reticent manner. I thought that they would just be information gathering sessions, and I’d have to spend a lot of time talking about what is Bitcoin. Now, to my surprise, everyone that I spoke to was familiar with Bitcoin. Many of the PMs themselves have owned Bitcoin for a long time in their personal capacity. And they recognize the fact that they’re unable to invest directly in Bitcoin and in many cases still can’t invest even in a Bitcoin ETF. And so BlackRock’s ETF is still off limits for them. What they can purchase are stocks. And again, pleasantly surprised, many of them had heard about MetaPlanet already. And so I guess our reputation now is extended far beyond the Japanese borders. And they said that we were uninvestable in the past. And what they look at as an institution is ensuring that the stocks they invest in have significant liquidity and a significant market cap. We take both of those boxes now, finally. For many, it’s sort of a $5 billion plus market cap, which is when kind of the doors open to them as an opportunity to look at companies. But more than the market cap, it’s the liquidity. And so if you’re a $5 billion market cap company that trades $5 million a day, $10 million a day trades by appointment. That doesn’t meet, you know, one of the very important requirements. And so, yeah, the discussions were great, they were engaging, people knew what Bitcoin treasury companies were, it’s become this topic of discussion, not just within the company, but, you know, at dinners and at meals that they have with each other and with their peers. And so I’m feeling incredibly optimistic that more and more money will flow into Bitcoin treasury companies. I love seeing how many new Bitcoin treasury companies are popping up in every corner of the globe. It’s absolutely great for the industry. And it’s great because finally there are companies that are able to provide access to individuals that in the past could not get access easily. But more importantly, institutional capital, which is where all the capital is. They haven’t been able to play the Bitcoin story. They haven’t been able to get exposure to Bitcoin. And finally, there is a mechanism for them to do so. And that is the Bitcoin Treasury Company.
Richard Byworth [00:34:20]: Yeah, I always talk about the release valve of the money printing, right? The money printing has predominantly gone into financial markets and push valuations to ridiculous degrees in the equity markets, the bond markets, and even to some degree volatility, you know, you, if you’re a convertible bond guy, you’re trying to trying to trade volatility, you know, valuations just keep getting pushed.
Simon Gerovich [00:34:40]: Yes,
Richard Byworth [00:34:40]: higher and higher. And the vol just isn’t there. Because every time there’s a dip, they print more money. You know, same in the bond market where you’ve got yields really not representative of where the basement is. Yes. Because bond prices have been pushed higher and higher by the institutional capital flowing in. And I do see, you know, what you are hopefully about to do with the pref market, but what Saylor particularly has been doing. And then, of course, with the equity as well, allowing that release valve to just let capital percolate into this Bitcoin asset for the first time, as you say. Yeah,
Simon Gerovich [00:35:16]: and there’s just incredible amounts of capital all around the world that’s looking for, I think, exposure to Bitcoin. And it’s up to companies like Strategy, like MetaPlanet, other Bitcoin treasury companies to identify those pools of capital and offer them what they’re looking for.
Richard Byworth [00:35:31]: Yeah.
Simon Gerovich [00:35:31]: The equity side is really easy as a first step, but then realizing that there are pools of capital that have different risk return objectives and to offer them and design them something which meets those requirements I think is the tremendous unlock.
Richard Byworth [00:35:47]: One final question, because I remember we talked about it earlier, but I forgot to mention it already. So how do these institutions think about MNAV? Are they thinking about it? Because I think everybody struggles to think about MNAV and what it means. Is a low MNAV good or is a high MNAV bad? How really should you think about it? And I always call it the multifaceted diamond of a Bitcoin treasury company, because you can’t just look at that. You need to understand the aggression as well. So how are these institutions thinking about MNav?
Simon Gerovich [00:36:19]: There isn’t one answer. Everyone has a different view. Everyone has a different approach. I think some people are a lot more thoughtful. I think the most unthoughtful response is, how can you trade at a premium? Why should I buy a portfolio of assets that is worth one and pay four for it? And I think what’s hit it for me is that those who think about Bitcoin treasury companies as simply a portfolio of Bitcoin are missing the forest for the trees. The important thing is looking at their ability to grow, their ability to grow Bitcoin per share. And so there’s lots of metrics like BTC yield, etc., which are just one measure to show how quickly a company may be growing. And, you know, generally, you, you probably want to buy companies that are growing their BTC yield BTC per share at a faster rate than those who are not one institution said that their strategy will probably be buying all the companies with high m navs and shorting the ones with low m navs. Which is a bit ironic, because generally in traditional finance, you buy the undervalued companies and you sell the overvalued companies. But that was a very good point. He noticed and recognized that the higher the MNAV, the more you’re able to buy Bitcoin with minimal dilution. I think that’s a very, very important point. For us, You know, our MNAV has really oscillated between sort of three times MNAV and seven times MNAV over the past 14, 15 months. There have been times where it’s spiked higher than that, but generally it’s traded within that range. And every time it gets to a kind of nearer three times MNAV, that’s when I think people see relative value in MetaPlanet versus others, given the pace of our acquisitions, and that’s when we usually see a bit of a pop in the stock price. Obviously, there’s nothing we can do to control our share price, but we are guiding the market that three to six MNAV is kind of our sweet spot. And if MNAV rises too much above kind of seven times, then that’s when we ought to be more aggressive and raise as much capital as we can. But if MNAV falls below three, then that’s when we take a step back and perhaps put less pressure on the stock. Strategy has the benefit of having now many gears. So when MNav is lower, they can do more of their preference equity issuances.
Richard Byworth [00:38:42]: I think last time you came on the show, we’d just hit the bottom of that channel as sort of a three, three and a half times MNav. a lovely run to almost eight times MNAV, I think it was. So now we’re back at that three times MNAV, maybe a history repeat.
Simon Gerovich [00:39:00]: I think it’s less to do with the three times MNAV and it’s more to do with your wonderful podcast. So thank you for that.
Richard Byworth [00:39:06]: Great. Simon, a pleasure always. Thanks for coming on.
Simon Gerovich [00:39:09]: Thank you very much. Thank you for having me. Look forward to the next one.
Richard Byworth [00:39:12]: Definitely.