Key Takeaways
- Instead of issuing more common shares, Metaplanet uses perpetual preferred shares to raise funds.
- Preferred shares usually don’t carry voting rights, so the company preserves governance while expanding its capital base.
- These instruments are equity-like debt as they pay fixed dividends like bonds but have no maturity date like equity.
- However, the issuer may redeem the shares early when favorable to them, not necessarily to investors.
Metaplanet, a Japanese company pivoting toward becoming a bitcoin treasury firm, gained shareholder approval to issue two classes of perpetual preferred shares to fund further Bitcoin accumulation.
The idea: raise fresh capital without excessive dilution of common equity, then use that capital to buy more bitcoin, expanding its reserve. The approach mirrors somewhat what Strategy (the U.S. company known for accumulating BTC) has also done, issuing perpetual preferred “prefs” to fund bitcoin purchases.
Metaplanet reportedly filed a shelf registration up to ¥555 billion in paid-in amount for preferred shares, divided into two classes of up to ¥277.5 billion each.
But how does all this work in practice? Let’s step through the conceptual background first.
What Are Perpetual Preferred Shares?
A perpetual preferred share (often called a “perpetual preferred” or simply “preferred stock”) is a hybrid instrument with features both of equity and debt.
The “perpetual” qualifier means it has no fixed maturity date — that is, the issuer is not obligated to redeem the shares at some predetermined time.
Key features:
- Fixed or predetermined dividend: The issuing company promises to pay dividends (or distribution) to preferred shareholders at a stated rate (e.g. X % per annum).
- No maturity or indefinite life: Because there’s no maturity, the principal is not returned by default. The investor may have to sell in the market to exit.
- Callability: Many perpetual preferred shares include a call feature, which allows the issuer to redeem (buy back) the shares after a specific period or under specified conditions. That gives the issuer flexibility to retire the instrument when favorable.
- Subordination or priority: Preferred shares rank above common equity but below debt in the capital structure. In other words, in a liquidation, debt holders are paid first, followed by preferred shareholders and common shareholders.
- Non-voting (usually): Preferred shares often do not carry voting rights or have limited voting rights compared to common equity. The idea is to give dividend priority and capital claims without diluting control.
- Dividend treatment (cumulative vs noncumulative): Some preferred shares are cumulative, meaning if a dividend is missed in a period, it accumulates and must be paid before ordinary dividends. Others are noncumulative, meaning if the company skips a dividend, those payments are lost (they don’t accrue).
- Convertible or participating features: Some preferred shares may convert into common shares (convertible preferred), participate in excess profits, or have other special rights. However, these are optional embellishments.
Because of these mixed traits, perpetual preferred shares are often considered equity-like debt, more stable than common equity (in terms of income) but riskier than debt (since dividends are not guaranteed, and there’s no maturity to enforce repayment).
Valuation of Perpetual Preferred Shares
Because the instrument is akin to a perpetuity (a never-ending series of payments), a straightforward valuation formula is:
For example, if a preferred pays $6 per year and investors demand a 6% yield, the price would be $100. If yield expectations rise, the market price falls; if yield expectations fall, the price increases.
However, other factors will adjust this in practice: call options, credit risk, liquidity, embedded conversion rights, macro interest rates, etc.
Differences Compared to Common Equity and Debt
It helps to contrast perpetual preferred shares with plain common equity and debt to see their unique place.
| Features |
Common Equity |
Perpetual Preferred Shares |
Debt / Bond |
| Maturity / redemption |
Indefinite (no maturity) |
Indefinite (no maturity) |
Finite maturity (often) |
| Priority in claim / liquidation |
Lowest (after all creditors, preferred holders) |
Middle (after debt, before common) |
Highest (first among claims) |
| Dividend / interest payments |
Variable / discretionary |
Fixed / contractual (but non-guaranteed) |
Fixed / contractual interest payments |
| Voting rights |
Usually yes (full voting) |
Usually none or limited |
Typically none |
| Issuer’s obligation to repay principal |
No |
No (unless callable) |
Yes |
| Tax treatment (issuer) |
Dividend not tax deductible |
Dividend not tax deductible |
Interest expense is usually tax-deductible |
| Sensitivity to interest rates |
Equity value tied to earnings/growth prospects |
More sensitive to rates (like a bond) |
Very sensitive to interest rates and credit spreads |
Thus, perpetual preferred shares offer some of the income stability you see with debt-like instruments without the firm legal obligation to repay the principal and with greater subordinated risk.
Why Metaplanet Prefer Perpetual Preferred Shares to Pursue 210,000 BTC Goal
Now, let’s examine how issuing perpetual preferred shares could support Metaplanet’s ambition of building a large Bitcoin treasury (e.g. 210,000 BTC) without undermining its capital structure or diluting common shareholders too much.
Raising Capital While Managing Dilution
- If Metaplanet were to issue more common shares, that would dilute existing shareholders’ ownership. By contrast, issuing preferred shares often avoids or minimizes dilution of voting power or economic control, because preferred shares usually don’t carry votes.
- Preferred issuance gives access to fresh capital that can be deployed to buy BTC, without selling new common equity or taking on too much conventional debt.
Flexible Capital: No Hard Repayment Schedule
- One of the big advantages is that since these perpetual preferred shares don’t require principal repayment (absent a call by the issuer), Metaplanet can focus on generating returns (or accumulating assets) rather than servicing debt principal obligations.
- This flexibility is critical when buying an appreciating asset like Bitcoin, where capital appreciation may be a larger part of the return than cash flows.
Fixed Cost of Capital with Predictability
- The dividend obligations on preferred shares tend to be fixed (or formulaic), giving the issuer predictable financing costs, so Metaplanet can model how many BTC purchases it can support given expected dividend payments.
- For example, Metaplanet reportedly capped the dividend on its perpetual preferred issuance at 6%.
Balance Sheet Leverage & Structure Benefit
- Credit rating agencies often treat preferred shares more like equity than debt because the issuer has discretion over redemption. Therefore, they may receive what’s called “equity credit” in capital structure calculations.
- Issuing preferred shares can help manage the debt-to-equity ratio, reducing the need to take on traditional debt that might strain leverage or interest coverage.
Enabling Bitcoin-Backed Credit Products
- Metaplanet has mentioned the ambition to develop a Bitcoin-backed yield curve and issue BTC-collateralized credit and structured products.
- A robust capital base built via preferred shares supplies the cushion and credibility needed to support lending or debt issuance backed by the BTC held.
Aligning Incentives And Attracting Yield Investors
- Yield-seeking investors might be attracted to perpetual preferred shares, which offer higher yields than conventional fixed-income securities, especially in a world of low interest rates and volatile equities.
- Metaplanet’s offering is somewhat analogous to what Strategy has done in the U.S., issuing preferred equity to fund further BTC purchases.
- Investors who believe in the Bitcoin thesis can gain exposure via a preferred yield instrument.
Potential Risks and Considerations of Metaplanet’s Preferred Share Strategy
While perpetual preferences can be powerful, they also introduce risks and trade-offs.
Dividend Payment Risk & Noncumulative Structure
- If Metaplanet’s operations or Bitcoin yield generation face stress, it may skip or defer preferred dividends (especially if noncumulative). In such a case, investors lose that income.
- Because dividends are not legally guaranteed like interest on debt, investor confidence depends on the issuer’s credibility and cash-generating ability.
Interest Rate & Yield Risk
- Preferred shares are interest-rate sensitive. If broader yield curves rise, the relative attractiveness of fixed dividend preferred shares declines, pushing down their price and increasing yield demands.
- That could raise Metaplanet’s capital cost in future issues or make existing preferred shares more expensive to call.
Call Risk / Redemption Risk
- If Metaplanet calls (redeems) the preferred shares when favorable (for the issuer), investors may see their position terminated earlier than desired.
- Call provisions place optionality in favor of the issuer; investors demand compensation (higher yield) for bearing that risk.
Subordination & Bankruptcy Risk
- Because preferred shares are junior to debt, they may be at risk if the company cannot satisfy senior obligations in case of financial distress.
- In severe stress, preferred shareholders might lose principal even if debt holders are repaid.
Conversion or Dilution Risk
- If the preferred shares carry conversion rights into common shares, they may eventually dilute common equity if conversion is exercised.
- That conversion feature needs careful design (conversion ratio, trigger, restrictions).
Market & Liquidity Risk
- Preferred shares may trade less liquidly than common equity, especially in niche markets. That can widen spreads or cause volatility.
- Investor appetite depends heavily on yield, trust in Metaplanet’s Bitcoin strategy, and general market sentiment.
Volatility of Underlying Bitcoin
- Since much of the return hinges on Bitcoin’s value, large BTC price swings could stress the firm’s ability to sustain dividends.
- If bitcoin falls sharply, the value of the underlying assets declines, which weakens the capital cushion backing preferred shares.
Conclusion
Issuing perpetual preferred shares gives a company like Metaplanet a tool to raise capital without the constraints of debt maturity, without directly diluting voting control, and with more predictable fixed-cost obligations than equity.
When deployed toward a high-growth, high-volatility asset like Bitcoin, the structure aligns financing discipline with long-term accumulation goals.
However, the success of such a strategy hinges on credible execution, investor confidence, and resilience in turbulent markets. For Metaplanet, achieving a 210,000 BTC target via perpetual preferred shares would be an ambitious financial engineering play that must balance yield expectations, capital structure discipline, and exposure to Bitcoin’s inherent volatility.
FAQs
Metaplanet, a Japanese company repositioning itself as a bitcoin treasury firm, received shareholder approval to issue two classes of perpetual preferred shares. The proceeds will be used to accumulate more bitcoin, similar to how U.S. company Strategy has financed its BTC purchases.
Perpetual preferred shares are a type of hybrid financial instrument with traits of both equity and debt. They pay a fixed dividend like a bond but have no maturity date, so the issuer isn’t required to redeem them at any fixed time.
Common shares give voting rights and ownership in the company’s growth. On the other hand, perpetual preferred shares usually don’t have voting rights, but they come with priority in dividend payments and rank higher than common equity in liquidation.
The raised capital goes toward buying BTC for Metaplanet’s treasury. Because the dividends are fixed and predictable, the company can model its financing costs while holding a potentially appreciating asset (Bitcoin).
The information provided in this article is for informational purposes only. It is not intended to be, nor should it be construed as, financial advice. We do not make any warranties regarding the completeness, reliability, or accuracy of this information. All investments involve risk, and past performance does not guarantee future results. We recommend consulting a financial advisor before making any investment decisions.
Giuseppe Ciccomascolo began his career as an investigative journalist in Italy, where he contributed to both local and national newspapers, focusing on various financial sectors.
Upon relocating to London, he worked as an analyst for Fitch's CapitalStructure and later as a Senior Reporter for Alliance News. In 2017, Giuseppe transitioned to covering cryptocurrency-related news, producing documentaries and articles on Bitcoin and other emerging digital currencies. He also played a pivotal role in establishing the academy for a cryptocurrency exchange website. Crypto remained his primary area of interest throughout his tenure as a writer for ThirdFloor.
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