Bitcoin companies are learning that holding forever takes cash

Bitcoin Companies Face Crunch as Lenders Seek Cash, Not Coins

Financing Constraints for Bitcoin Holders

Metaplanet's recent sale and repurchase of 10,000 BTC demonstrates the challenges faced by companies holding Bitcoin as a reserve. The Japanese treasury company's decision to sell and buy back coins at a higher price per coin was driven by its pursuit of a credit rating and better access to financing. This move was aimed at alleviating concerns among prospective creditors about the company's ability to meet its obligations, even if shareholders were attracted to the company due to its Bitcoin holdings.

The Cost of Proving Commitment

The cost of proving the company's commitment to its Bitcoin holdings was substantial, with Metaplanet receiving ¥124.7 billion from the sale and spending ¥149.9 billion on the subsequent purchase. This resulted in a price difference of about ¥11.57 billion, before transaction costs and potential tax effects. The company's shareholders were left with an expensive receipt for the demonstration, as the proceeds were not used to repay borrowings or bonds.

The Struggle for Liquidity

The relationship between corporate Bitcoin trading and financing deadlines is complex. Shareholders typically wait years for a higher price, while lenders have contracts that specify when they want their money back. The same reserve must satisfy both groups, and creditors need to know what happens when the payment date and the preferred selling price don't cooperate. Metaplanet's June financial statement reported ¥67.49 billion in short-term borrowings and ¥8 billion in bonds payable within a year, against ¥1.09 billion in cash and deposits and ¥250 million in USDC.

Managing the Financing of Bitcoin Holdings

The company's financing strategy is built around a dedicated reserve and separate cash balance. The dedicated reserve supports preferred-stock dividends and debt interest, and its policy requires board authorization for other uses. The separate cash balance provides flexibility, but adding the two together does not make the entire sum an unrestricted pot for future debt repayments. Metaplanet's recent actions highlight the work involved in managing the financing of its Bitcoin holdings, including the use of its reserve for dividends and interest, repurchasing preferred shares, and other funding activities.