Metaplanet's Bitcoin Treasury Expansion and Preferred Share Innovation: A Strategic Path to Undervaluation Arbitrage?

In the ever-evolving landscape of Bitcoin treasury firms, Metaplanet has emerged as a bold innovator, leveraging a dual-preferred share structure to amplify its capital efficiency while navigating the volatile tides of the crypto market. By introducing MARS (Metaplanet Adjustable Rate Security) and MERCURY (Class B perpetual preferred shares), the company has redefined how Bitcoin-backed entities raise capital, distribute returns, and manage risk. But does this structure truly unlock undervaluation arbitrage opportunities, or does it expose investors to hidden vulnerabilities in a market still grappling with valuation dislocations?

The Dual-Preferred Share Framework: A Hybrid of Stability and Leverage

Metaplanet's capital structure is anchored by two distinct instruments:
1. MARS (Class A preferred shares): These senior shares offer adjustable dividends tied to the share price. When the stock trades below par, dividends rise, and vice versa, creating a self-stabilizing mechanism to cushion volatility according to reports. This design minimizes dilution risks and ensures income stability for investors, even in a down market.
2. MERCURY (Class B perpetual preferred shares): These shares pay a fixed 4.9% annual dividend on a ¥1,000 notional strike price, with quarterly payouts and a conversion feature into common equity at ¥1,000 as disclosed. The perpetual nature of MERCURY locks Metaplanet into indefinite dividend obligations, but the conversion option ties its value to Bitcoin's price movements through the company's common stock.

The MERCURY issuance alone raised ¥21.25 billion ($150 million) in 2025, with 23.61 million shares priced at ¥900 each according to announcements. This capital is entirely reinvested into Bitcoin, creating a flywheel: higher Bitcoin prices increase the company's asset value, which in turn could drive common stock appreciation and MERCURY conversions.

Capital Efficiency and Bitcoin's Macroeconomic Tailwinds

Metaplanet's strategy hinges on Bitcoin's long-term appreciation and the structural advantages of preferred equity. By issuing MARS and MERCURY, the company avoids diluting common shareholders while securing low-cost capital. The adjustable dividend mechanism of MARS ensures that dividend payments remain aligned with the company's equity value, reducing the risk of cash flow strain during market downturns according to analysis.

Meanwhile, MERCURY's fixed yield offers a compelling alternative to traditional fixed-income instruments in a low-interest-rate environment. For institutional investors, the conversion feature adds a bullish leveraged component: if Bitcoin surges and drives up Metaplanet's common stock price, MERCURY holders can convert to equity and capture upside gains as reported. This hybrid structure mirrors the appeal of Bitcoin ETFs but with a unique twist-investors gain exposure to both the asset and the company's capital appreciation.

However, the success of this model is inextricably tied to Bitcoin's price trajectory. A prolonged bear market could erode the company's asset base, forcing it to liquidate Bitcoin to meet dividend obligations. The fixed 4.9% yield on MERCURY becomes a double-edged sword: it's attractive in a rising market but a burden in a falling one according to market analysis.

Risk-Adjusted Returns: Balancing Innovation and Exposure

The dual-preferred structure introduces several risk factors that must be weighed against its potential rewards:
- Bitcoin Price Sensitivity: Metaplanet's entire balance sheet is collateralized by Bitcoin. A 50% drop in BTC prices would halve its asset value, creating pressure to either sell Bitcoin at a loss or default on dividends according to market reports.
- Conversion Mechanics: While MERCURY conversions could benefit investors in a bull cycle, they risk diluting common shareholders if the stock price rises sharply. This creates a tension between preferred and common equity holders as revealed.
- Perpetual Obligations: Unlike traditional preferred shares with maturity dates, MERCURY's perpetual nature means Metaplanet is locked into dividend payments indefinitely. This contrasts with Bitcoin's cyclical nature, where prolonged downturns could strain liquidity .

Despite these risks, the structure's capital efficiency is hard to ignore. By issuing preferred shares, Metaplanet avoids the dilution typically associated with common equity raises. This allows it to scale its Bitcoin holdings faster than peers relying on traditional financing.

The concept of "undervaluation arbitrage" here rests on the idea that Metaplanet's preferred shares offer a discount to its Bitcoin-backed net asset value (NAV). If the market undervalues the company's Bitcoin holdings-due to short-term volatility or regulatory uncertainty-the preferred shares could trade at a discount to NAV, creating an opportunity for investors to capture upside as the market corrects .

For example, MERCURY's initial price of ¥900 implies a 10% discount to its ¥1,000 liquidation preference. If Bitcoin rebounds and drives up the common stock price, the conversion feature allows holders to unlock equity value. Similarly, MARS's adjustable dividends could stabilize income during periods of NAV compression.

However, this arbitrage hinges on Bitcoin's long-term appreciation. If the asset underperforms, the discount may widen rather than narrow, eroding returns.

Conclusion: A High-Conviction Play on Bitcoin's Future

Metaplanet's dual-preferred share structure is a masterclass in financial engineering, blending the stability of fixed-income with the growth potential of equity. It capitalizes on Bitcoin's macroeconomic tailwinds-institutional adoption, regulatory clarity, and scarcity-while mitigating some of the asset's inherent volatility through adjustable dividends and conversion features.

Yet, this is not a risk-free proposition. The company's survival depends on Bitcoin's price action, and its perpetual dividend obligations could become a liability in a bear market. For investors with a high conviction in Bitcoin's long-term trajectory, Metaplanet's structure offers a compelling way to leverage the asset's growth. For others, it's a high-stakes bet on a company whose fate is inextricably linked to the crypto cycle.

In a world where Bitcoin treasury firms are still grappling with valuation dislocations, Metaplanet's innovation may yet prove to be a blueprint for capital efficiency-or a cautionary tale of overleveraging in pursuit of yield.