Preferred Equity as a Double-Edged Sword: Capital Gains vs. Shareholder Dilution and Dividend Risk

Metaplanet's recent MERCURY Preferred Equity Offering has reignited debates about the role of preferred equity in crypto-native capital structures. By issuing ¥900 Class B perpetual preferred shares with a 4.9% fixed dividend and a ¥1,000 conversion price, the company aims to raise $150 million to turbocharge its Bitcoin accumulation strategy according to reports. While this move offers compelling upside for investors in a low-interest-rate environment, it also raises critical questions about dilution, dividend sustainability, and the long-term alignment of shareholder interests.

Strategic Benefits: Capital, Dividends, and Bitcoin Synergy

The MERCURY offering is strategically designed to leverage Japan's favorable regulatory climate and institutional appetite for yield. By targeting overseas institutional investors, Metaplanet secures capital to purchase an additional 179,177 BTC-nearly tripling its holdings to 210,000 BTC by 2027. This aligns with a broader trend of crypto firms monetizing Bitcoin as a balance sheet asset while generating recurring income via dividends.

The 4.9% fixed dividend is particularly attractive in Japan, where traditional fixed-income yields remain near historic lows. For investors, this creates a dual-income stream: steady dividends and potential appreciation if Metaplanet's common stock price rises above ¥1,000 per share the conversion threshold. The perpetual nature of the shares further insulates Metaplanet from refinancing risks, allowing it to maintain a predictable capital structure while avoiding immediate dilution from common equity issuance according to analysis.

Financial Risks: Dilution, Dividend Obligations, and Bitcoin Volatility

However, the offering's benefits come with significant caveats. First, while Metaplanet claims dilution is capped at 2.07% in the event of conversion according to data, the company's history of aggressive share issuance-expanding its float from 57 million to 459 million shares since 2022-raises concerns about long-term shareholder value erosion as research shows. The MERCURY offering adds another layer of complexity, as the third-party allotment and new rights issuance to EVO FUND could further fragment ownership according to reports.

Second, the fixed dividend obligation introduces financial risk. If Bitcoin prices plummet, Metaplanet's ability to generate sufficient revenue to cover dividend payments-and its own operational costs-could be compromised. This is especially concerning given the company's net asset value (NAV) multiple of 2.79, which exceeds peers like Strategy (1.6), suggesting potential overvaluation according to analysis. A sharp decline in Bitcoin's price could force Metaplanet to prioritize dividend payments over strategic Bitcoin purchases, creating a misalignment between capital allocation and shareholder returns.

Bitcoin and Metaplanet's NAV Dynamics

The volatility of Bitcoin is a critical factor in Metaplanet's financial health. As of 2025, Bitcoin has shown a mixed trend, with sharp price swings that could impact the company’s net asset value (NAV). With Bitcoin currently valued at approximately $85,000, Metaplanet's holdings are worth over $17.8 billion, yet this value is highly susceptible to swings in market sentiment and macroeconomic trends. The company's NAV multiple of 2.79 suggests that its stock price is significantly higher than its book value, which could become unsustainable if Bitcoin experiences a prolonged bear market.

Historical Performance and Backtesting Considerations

In the past, Metaplanet has demonstrated resilience in bear markets by increasing its Bitcoin purchase rate while maintaining a disciplined capital structure. For example, during the 2023 bear market, the company continued to accumulate Bitcoin at average prices significantly below the prevailing market rate, enhancing its cost basis.

Given these historical patterns, it is worth examining the effectiveness of Metaplanet’s capital allocation strategy under different market conditions.

Conclusion: A Calculated Gamble in a High-Stakes Market

Metaplanet's MERCURY offering exemplifies the double-edged nature of preferred equity in crypto investing. On one hand, it provides a novel mechanism to fund Bitcoin accumulation while offering yield in a low-interest environment. On the other, it amplifies existing risks related to dilution, dividend sustainability, and regulatory uncertainty. For investors, the key question is whether the potential for capital appreciation and dividend income justifies the long-term exposure to a company whose value is inextricably tied to Bitcoin's price trajectory.

As the December 22 extraordinary general meeting approaches, stakeholders must weigh Metaplanet's ambitious Bitcoin strategy against the structural vulnerabilities of its capital structure. In a market where volatility is the norm, the MERCURY offering serves as a cautionary tale: even the most innovative financial instruments can become liabilities if misaligned with a company's operational realities.