Hello, and welcome to Virtual Investor Conferences. On behalf of OTC Markets, we are very pleased you've joined us for our Digital Asset Conference. Our next presentation is from Metaplanet. Please note you may submit questions for the presenter in the box to the left of the slides. You can also view a company's availability for one-on-one meetings by clicking Book a Meeting. At this point, I am very pleased to welcome Dylan LeClair, Director of Bitcoin Strategy at Metaplanet, an OTCQX Best 50 company, which trades under the symbol MTPLF and MPJPY, and on TSE under the symbol 3350. Welcome, Dylan.
Hey, thanks, Lily. Hello, everyone. It's wonderful to be here. I appreciate everyone taking the time to tune in and hear what I have to present on our company, Metaplanet. So I guess to begin, I'll give a quick background. I'm not sure if people are familiar with what we do or who we are, but I encourage everybody throughout the presentation just to send in a Q&A, and I'll get to them at the end. But I also might mid-presentation, if it's relevant, I will try to get to any questions as they come in. No question is off-limits, basic or advanced. And so I guess to begin, what is Metaplanet? What do we do?
Why is there a Bitcoin spaceship, rocket ship on this main page? Well, to start, Metaplanet, previous to 2024, was formerly Red Planet Japan. It was a budget hotel chain, and everybody knows what happened during 2020 and the years following with COVID. Very tough time in the hospitality industry, and so Red Planet, formerly with 30 hotels, Pan- Asian franchise, became one hotel looking for a pivot. So I joined Metaplanet right after the Bitcoin pivot started in May of 2024. And at that point, Metaplanet, with a name change, was a $14 million micro-cap company on the Japanese Stock Exchange, with no future, more or less.
Today, fast-forward a bit, we are a $3.5-$4 billion and change company with 35,000 Bitcoin, so about $3-$3.5 billion of Bitcoin and about $300 million of debt, a little bit less than that. Our company has radically transformed in the past 20-20 months or so, and we have been one of the best-performing stocks in the world since our pivot. Our stock is up about 2,600% since the inception of our Bitcoin Standard. So then here's just a few stats on that for everyone. So what do we do? Why do we do it?
Well, we're a Bitcoin treasury company, and so, for investors, for interested investors, it starts with an acceptance of Bitcoin. And so I guess before we get any further, I didn't unfortunately include a slide on why Bitcoin, but I think I can just, you know, talk verbally and bring you guys with me on this journey. Why Bitcoin? Well, we put out a white paper in May of 2024, and white papers are boring, and no one wants to read those. So, the story is quite simple. We live in a world where fiat debasement, currency debasement is everywhere and will continue into the future. This is not a United States phenomenon, where I'm from, I'm an American.
It's not a Japanese phenomenon, where Metaplanet is located and domiciled. This is global. This is every G7 country. This is every developing country. Fiat currencies, as we know them, are more or less an illusion and a rare. We're sort of 50 years into this global experiment of fiat currencies. Prior to that, obviously, we have had different monetary standards, but, you know, more or less international economics was pegged, quasi-pegged to gold. And so we're embarking upon this great experiment, and, you know, unfortunately, it will probably end, well, not end, but it will, the end result won't be all that favorable to the value of the currency itself.
And so companies like Metaplanet, and I think, you know, companies, countries, and individuals need to think very, very deeply about what this means. We're told that inflation at 2% is good and normal, and that this consumer price index is what measures inflation. And at Metaplanet and individually, we have a bit of a different thought around this. We don't believe inflation is 2%. We, the, you know, the CPI and consumer price indexes, you know, you can believe them or not, but, you know, ultimately, we believe, given where debt levels are globally, we're in for a sustained period of financial repression. And what that means in non-economic jargon terms is that to get out of these high levels of debt, there's not going to be a default.
on a gold standard, a default looks like what the U.S. did in 1933 or 1971, which is we basically, you know, seized the citizens' gold in 1933 with Roosevelt, or in 1971 with Nixon, we basically tell other sovereigns, "Sorry, we're not gonna give you the gold. Here's our printed dollars." But now we're not on a gold standard, we're on a dollar standard. We're on a debt-based monetary standard. And so when governments are up to their eyeballs in debt like they are today, especially Japan, the United States, the EU, et cetera, the actual end game is just perpetual monetary debasement. So I think every investor has to think deeply about two things... and this is sort of a barbell. It's counterparty risk and debasement risk, inflation risk, right?
And so traditionally, gold fills that role, right? You don't need a counterparty to hold, you know, a monetary metal, and it's also insulates you from the monetary debasement of fiat currency. But we think there's a reason that gold, you know, failed, and the price action is saying it didn't fail. But there's a reason we're all using globally fiat currencies today when our ancestors used gold-backed currencies. It's because there's trust inherent in that loop, right? So you need to trust your bank has the gold it says it has, or the country, or the central bank says it has the gold. It takes a lot of energy and a lot of men with guns to transport gold around the world. And we think Bitcoin actually checks a lot of these boxes.
This is a globally decentralized network that no one controls unilaterally. There's no off switch. It's a decentralized computing system where everybody's talking to each other and you know, playing by the rules. And so, of course, the rules can change. You can change the rules of chess, but no one's gonna play with you. So we're 15 years into this, you know, Bitcoin world, and it's a $1.8 trillion asset. So if you think of, you know, kind of the Mag 7 or tech giants, there's not really a trillion-dollar company that has gone away, right? These are big tech monopolies, big tech giants, and we see Bitcoin as that, but with no CEO, with no board, with no country, with no counterparty.
Metaplanet, long story short, we are embarking upon a Bitcoin Standard. Every decision we make is based in Bitcoin terms, and we're thinking it for our shareholders in Bitcoin terms. Bitcoin's price is gonna go up and down, and we think on a longer time frame, it's gonna go a lot, a lot, lot higher. But frankly, we're not concerned about the day-to-day, week-to-week, month-to-month, quarter-to-quarter, or even year-to-year volatility. We think that's par for the course.
And so I guess to jump around a little bit, when we first joined OTC Markets in December 2024, we had about 1,700 Bitcoin, so about $170 million, which was transformational for us, considering that, you know, in about 8 months, we had 10x the size of our balance sheet and of our company. But we were still a very small fish in the pond, and we set high targets for 2025. We set a 10,000 Bitcoin target and then a 30,000 Bitcoin target, and we surpassed both. And this was predominantly done with equity financing, so common equity that we sold into the market.
Traditionally, as an investor, we're taught that dilution is bad, and share dilution is bad if it's dilutive. But for us, again, Metaplanet's thinking in Bitcoin terms, and so from the start of January 2025 to the end of the year, we increased, you know, for every common share, we increased the Bitcoin exposure per that common share by 570%. We call this increase in Bitcoin exposure BTC Yield, or it's basically the rate of change in Bitcoin per share. So that's what drives us. Bitcoin per share is how we think of the world, and as a result of that, we have, you know, various tools in our toolkit. And so, if we... sorry to skip around here, we have a couple tools.
We have our common equity, and then we have perpetual preferreds, and we're really excited about perpetual preferreds for a few reasons. One, perpetual preferred equity sort of acts like debt or fixed income, right? You're sort of pulling forward the future. But unlike debt, where there's principal repayment, a perpetual preferred is a perpetuity. It's a perpetuity. There's no principal repayment. So our big idea is essentially we are building an engine for Bitcoin accumulation in the Japanese market. We're gonna do it two ways. There's some investors that really, really are excited about common equity. They want Bitcoin upside, they want volatility, they want performance, and there's downside volatility, of course. There's another set of investors, and you know, probably arguably a much, much bigger set of investors that don't want. They don't want equity exposure.
They want fixed income, they want stability. And so our intention, and we're, we're steadily marching upon, upon these goals, is to have preferred instruments that offer lower volatility, lower correlation to Bitcoin, that allows us to have a funding mechanism in the Japanese market in yen. And so for instance, you know, so something like a variable interest rate, perpetual preferred, has the price stability, similar to a treasury bill with much higher yields than is offered in the Japanese market, which is currently the short rate in Japan is about 70 basis points. So our, you know, our rocket ship is fueled by the fact that we're in, in Japan with access to the Japanese capital markets, embarking upon a 100% Bitcoin Standard. We are one of one in that regard.
So, common equity is very accretive when, you know, the book value or your price- to- book is at levels where it'd be accretive or advantageous to issue common equity. When it's not, we have perpetual preferreds, which is agnostic to our price- to- book, which we can use as a fundraising mechanism. And if you can think of, this is the simple math that we do. If your cost of a preferred, or your dividend, or your, let's just say, your cost of capital is 4, 5, 6% in yen, and Bitcoin performs at 8%, 10%, 12%, 15, 20% a year over the coming decade, then there is an extreme accretion to the common shareholder, given that you have one fixed cost and a compounding performance of Bitcoin.
And so this is, this is sort of how, how we think of the world. If I can go back here. So how, how do we maximize shareholder value? And, and how does something like a perpetual preferred share, which comes with a dividend, how do we service that? So we have a few tools in our toolkit. We're not just buying Bitcoin and sitting on it. We're, we think of our, our kind of, our business as an engine, and there's, you know, the mechanics of this engine are pretty important. And so, as we're raising capital, we have an option. We can, we immediately wanna usually just buy Bitcoin, but we can enter the Bitcoin market through a few ways. As we know, Bitcoin is volatile.
On the surface, face value, volatility is bad, volatility is scary, and that's what you're taught, and fair, and fair play. For us, volatility is a tool. It's something that we wanna harness, and so we do that with our Bitcoin income generation business line. And so, for instance, you have the option today, if you have $90,000, you can buy one Bitcoin, or you could, say, sell a Bitcoin put option at $90,000 for next week, and you could get paid to do that. And because Bitcoin is volatile, you could get maybe 1% or 2%, for that, right? And so Metaplanet is embarking upon Bitcoin Standard with both spot market execution and a Bitcoin income generation business. Last quarter, we made about $25 million of revenue in this business line.
And for the year, I believe we made about, we made, JPY 9 billion of revenue, in yen, so about $70 million or so, and a bit less than that in operating profit, about $40 million of operating profit. Our guidance for next year is markedly higher than that, at about $70 million of operating profit. And so we view the Bitcoin income generation business line as a way to fund our perpetual preferreds. Sorry. Just looking at the questions here. Okay. Are you trading at a discount or premium to Bitcoin? And so it's a great question. Well, here's a good slide for this.
So here's how we think of M NAV, and this is basically the price- to- book value for a metric for a Bitcoin treasury company like Metaplanet. And so M NAV basically is what's your market cap, less your debt, less your notional preferreds... I'm sorry, including debt, including perpetual preferreds, less your cash, divided by the value of your Bitcoin. So basically, a price- to- book, right? And so right now, our M NAV is about 1.25, so a bit higher than MicroStrategy. And why would something trade—why would a company like Metaplanet trade at a premium to its assets? And in our view, it's because we're not a closed-end trust. We are an operating company with capital market toolkits, with a massive opportunity in the Japanese market.
What do I mean by that? Well, to be frank, I think the simple way to say it is, the Japanese market is sort of like where the U.S. market is in or was in 2019, maybe 2020. ETFs for Bitcoin in Japan aren't coming until 2028. Broadly, the financialization and regulation of Bitcoin, that just, you know, that wave that just happened in the U.S. over the last two years, that's not gonna start until 2028. And so all of the infrastructure that you would, you know, think of from the legacy financial system, prime brokers, banking, custody, lending, derivatives, spot execution, essentially none of that exists in the Japanese market. We have U.S. subsidiaries, so we can access all the tools we need.
And so we have a very large opportunity to be a major player in the Japanese market with regards to everything to do with Bitcoin. And so we not only have, you know, the most Bitcoin in the Japanese public markets, but we have a large captive audience, so we have about 216,000 Japanese retail shareholders. Just to put some, you know, numbers to that, SBI Holdings, which is basically the number one retail broker in Japan, basically the Robinhood of Japan, that also has a crypto brokerage. They have essentially the same amount of shareholders as Metaplanet.
We have really captured the hearts and minds of the Japanese audience, the Japanese investor base, the Bitcoin maximalists, you know, and crypto people are included there. So, you know, we're really playing the long game here, and, you know, this isn't just a capital markets business, although that is where a lot of the value accretion comes from. That's where the big opportunity is, the capital markets in fixed income, in the equity markets. But ultimately, all of the infrastructure and all of the opportunity around the monetization of Bitcoin in the Japanese capital markets, we wanna be a dominant player there, and we think we have a great chance. Other questions. What are competitive advantages versus ETFs, closed-end trusts, and MSTR?
Well, we obviously wanna pay respects to MSTR where we can. They've been a trailblazer, and they had the courage and conviction to do a Bitcoin treasury strategy years before anyone else. We were very transparent in, you know, following their playbook back in 2024. You know, the real competitive advantage, I think, is we're in the Japanese market. The Japanese market is, the bond market especially, is seeing some turmoil right now. I think financial repression and, you know, some form of quasi yield curve control and currency intervention is imminent. It's already, I think, happened over the following few days, but, you know, we just, for instance, launched our first convertible perpetual preferred at a 4.9% dividend rate.
So, we offered it at 90%, so our financing for in perpetuity is essentially 5.4%. So let's just call it 5% for ease of math. Would you borrow $100 to pay back $5 a year and never pay it, and never have a principal repayment? Well, your cost, you know, you're basically your runway for that capital to invest is about 20 years, right? So we think we have a cost of capital advantage, never mind to strategy, but for, you know, the rest of the world, for our international competitors.
We think that we also have the ability, unlike IBIT or, you know, a closed-end trust, to be able to get leverage, technically, not leverage, MSTR calls it amplification, but effectively, you know, a form of leverage via perpetual preferreds with no principal repayment risk. And our intention and what we've done so far, our goal internally is to outperform Bitcoin. And so if Bitcoin's gonna go down, it's gonna be tough for Metaplanet to go up in the scenario where Bitcoin's down in a year, right? Last year, our stock was up a little bit, outperformed Bitcoin quite well. But why buy a Bitcoin treasury company?
Because there's gonna be amplified exposure to Bitcoin. What's the execution plan for accumulating an additional 175,000 Bitcoin? Well, like we said, our target here is 1% of the Bitcoin supply. That's a lot of capital. Our goal is to, with a combination of equity financing, well, I guess preferred equity is equity as well, but common equity and fixed income financing to both institutional investors and the Japanese retail market. We think there's a massive opportunity there. And, you know, the JPY 3 billion we raised last year was, you know, the year before that, we raised only about JPY 60 million or so. So we're looking to accelerate, and, you know, we're already the largest capital markets player in the Japanese market total, right?
So we raised, you know, more equity than anybody in the Japanese market by far last year, and our intention is to do that again. But we're gonna do it, you know, we're gonna do it diligently and, you know, bide our time well. It's, we're not gonna force anything if it's disadvantageous to shareholders. What else do I have here? Just to go over generally. Here is the global kind of rankings for Bitcoin companies, public Bitcoin treasuries. So what you notice, outside of, you know, the dominant position of strategy here, is we're the only player that's outside of the U.S. market.
Never mind in Japan, where we have about 95% of the Bitcoin, but we're the only international company on the list. And so I think, you know, it's tough to put into words here as an American speaking English to you all here, but there is a, there's a great sense of pride, and, you know, quasi-nationalism in the Japanese market around what Metaplanet is doing. You know, we had the courage and conviction to act before anyone else, and a lot of the followers of Metaplanet's strategy in the public markets during the kind of the downturn of the last 4 months, 6 months or so, have come out, have reverted, have apologized, and basically said, "You know, we're sorry for issuing equity. We're sorry for buying Bitcoin. We'll hold off from that.
We won't do it again." We're not apologizing. Volatility is the name of the game. We have a core mission. A lot of people are rallying behind us because of our, our steadfast view there. So, you know, our goal is to be number two here and, you know, eventually, hopefully, MicroStrategy and, you know, for the top spot, although that's a tough task. But really, we're laser focused on getting to that 1% threshold, and we think we're gonna have a monopoly on the Japanese market. Can you introduce the management team behind Metaplanet? That's a question. Yeah, so I don't have a slide on it here, but we do have a, on metaplanet.jp, our website.
Never mind, we have a great analytics page that everybody should check out, but there's also a team section. Most of the management team outside of myself comes from a very TradFi-heavy background. So, our CEO, Simon Gerovich, he started his career at Goldman Sachs as an equity derivatives trader. This is partly why we have a ton of confidence in our income generation business, which is dealing natively in derivatives. You know, our COO has also spent 20 years at Goldman Sachs in Tokyo. So we're a very TradFi-heavy background, and I think that this is part of the reason why we've had a, you know, great success in the capital markets in Japan.
It's a very unique market, and, you know, there's a high bar for working with, you know, bulge bracket investment banks. Your framework targets perpetual prefs at 25% of NAV. Where are you today on that path, and what are hard limits, regulatory, rating, internal constraints on further pref issuance? Yeah, so that's a great question. Our framework is 25% of Bitcoin NAV, and that's sort of a, that's sort of just a... Again, that's a framework, right? The real constraint is in our Bitcoin NAV, as it's not debt, right? So loan-to-value doesn't matter as much when there's not principal repayment. The real choke point or threshold is the ability to pay dividends, right?
So the ability to basically service that cost of capital, that's what's important to us. And so as we scale our Bitcoin income generation business, we're gonna, you know, feel that 25% may be, you know, materially low. Right now, we have JPY 150 million of notional prefs outstanding. And so, you know, call that a little bit less than 5% of our Bitcoin NAV, with about, you know, 9% as well with debt, right? So we're, you know, about 14% amplified in terms of our debt plus prefs as a percent of our Bitcoin NAV. So there's room to, you know, materially increase that, and also, as we raise either equity capital or, you know, preferred equity, we'll be buying Bitcoin with that, right?
So, you can kind of loop it. You raise more capital, you buy more Bitcoin, BTC NAV expands. The January 31st Class B preferred dividend is being funded from capital surplus rather than operating cash. Okay, so this is, great question, Victor. We just paid our first preferred dividend, on our convertible preferred stock. The fact that it's coming from capital surplus, this is just a Japanese accounting thing, not to get too much in the weeds, but, it's all the same. It's all just cash, it's all—you know, our balance sheet, we've went from capital reserve to capital surplus at the end of the year. No capital actually moved. This is just the nitty-gritty of Japanese GAAP. I would say for U.S. investors, it's merely an accounting thing.
There's actually no material impact there to shareholders. You've booked roughly JPY 600 million-JPY 700 million in Bitcoin impairment for FY 2025, yet raised both 2025 and 2026 revenue and operating income guidance. Okay, so our Bitcoin impairment is based on the mark-to-market of Bitcoin. That's a non-operating expense. We also, the number you see at face value is a lot larger than the actual result because our Bitcoin, a lot of it is being held in the United States, so we account for it in dollars and then convert to Japanese GAAP. So we had a large Bitcoin impairment, but if you also look, there's a large, we have a huge foreign exchange gain, right? Because the yen depreciated against the dollar.
So ultimately, you know, we put out guidance based on our revenue and based on our operating income. Non-operating income, you know, our net income, we don't give net income guidance because Bitcoin could be a $150,000 or $200,000 by the end of the year, or it could also be $80,000, right? And we can't control that, and we know that, right? So our destiny is tied to Bitcoin, so we don't give guidance on, you know, Bitcoin's volatility. We think it's going higher, but we can't tell where it's gonna be next quarter or the quarter after that.
So as a result, you know, obviously, we wanna buy Bitcoin lower than higher, but to be frank, we're not too concerned with the quarter-to-quarter volatility of Bitcoin, and as a result, we can't in good faith put out guidance on where we think it'll be. How much capital, both OpEx and CapEx, are you allocating to non-Treasury businesses, and when do you expect these businesses to become cash flow positive? So I'd say it's minimal right now. You know, the biggest expenses right now for the company are essentially, you know, the underwriting fees, the legal stuff around capital raising. So if you do a public offering with an investment bank, you know, that's the bulk of the expenses. We're a very, very lean team.
I think you'll see that in our financial results, you know, in terms of, you know, the operating expenses, we're very, very slim. And when do you expect those businesses to become cash flow positive? Well, I think, you know, the real race in Japan for Bitcoin-related businesses, you know, licensed businesses, doesn't start until 2028. But in the meantime, as a public operating company, you know, the unofficial asset management business of accumulating permanent capital on our balance sheet, we've been going at that for 20 months.
So I think that's our real competitive advantage until the regulatory environment in Japan, you know, really turns around and we're gonna be a player there, but I can't speak on that too much, as we don't have much to disclose there yet. Given the increased complexity, Bitcoin Treasury derivatives, perpetual prefs, and new platforms, how are you operating disclosures so that a traditionally equity or credit investor can model this business without being crypto derivative specialists? Yeah, great question. So I think we wanna keep everything very, very simple, right? So we have two buckets, right? We have our Bitcoin long-term HODL bucket, which you see here, 35,102 Bitcoin. You can see all this Bitcoin on chain. It's unencumbered, there's no derivative sold against it.
There's you know, if Bitcoin goes up or down, we're not gonna lose this Bitcoin, right? It's, it's segregated. We then have an income generation business where we have, where we have capital, where we do kind of the complex derivative stuff, income generation, et cetera. At the end of the quarter, we disclose our results on revenue, on any Bitcoin purchase through that program, you know, all the things that investors would need to know. We want our, our story and our balance sheet to be able to be understood in a screenshot, and, I, I think we do a pretty solid job of that if you go to our analytics dashboard. And so I, I think that's a solid response, but happy to, to give more info there, in a follow-up.
For a perpetual preferred at 5% dividend, what is your minimum required dividend coverage ratio, and what happens if the business cash flow declines? Great question. So I think, you know, our goal is to have about 5% of our capital, you know, at all times in our income generation book, you know, book. So we can have dollars as collateral or Bitcoin as collateral and be monetizing on that. If for whatever reason, our revenue goes to zero tomorrow, which we don't expect to happen at all, there's no reason for that. You know, I guess if Bitcoin volatility goes to zero, and it's a stable coin, that changes the business, but then we still have that cash there to utilize.
So right now, you know, JPY 100 million or so in cash, right? Which would be, you know, 15 years of dividends at this rate. But then we still have our BTC reserve, right? So we can use that as collateral. We could sell some Bitcoin. Our intention is to not sell Bitcoin, but right now we have about 400 years of dividends or more in our BTC NAV, right? So it, it's not not a real problem, but, you know, it's good to contingency plan. Okay, it looks like I'm running out of time, and I don't wanna to go over here. So, any questions I didn't get to, I would love to have a follow-up, you know, call with anybody or, or catch up over email.
Sorry for jumping around a bit, but hope I made the 30 minutes worthwhile. Appreciate everyone tuning in, and again, if anyone has any questions or wants to talk more about Metaplanet, I would be happy to. Thanks for the time.