The severe market correction of October continues to have an impact on the corporate sector. Companies with large Bitcoin reserves in particular are feeling the pressure.
Japan’s Metaplanet saw its book profit fall sharply in the third quarter, while the company’s Bitcoin position is seriously underwater for the first time. Analysts warn that other corporate treasuries are also feeling the same pain.
Profit evaporates due to crash
Metaplanet reported a profit of 10.6 billion yen, equivalent to approximately $1.4 billion, in the third quarter on the increase in the value of its Bitcoin reserves. That is a decrease of 39 percent compared to the previous quarter. The company then booked 17.4 billion yen, more than 2.4 billion dollars.
According to Metaplanet, the strategy remains intact, despite the volatility. In a note, the company writes that it is continuing its Bitcoin Treasury Business “as planned” and that results are not dependent on short-term fluctuations.
Bitcoin position is in the red
Yet the company’s vast Bitcoin stash is currently at a loss. Metaplanet owns 30,823 BTC at an average purchase price of $108,000. With Bitcoin around $103,000, the company is about 5 percent underwater. This is the direct result of the record crash on October 10, in which $19 billion in crypto positions were liquidated in one day.
That crash didn’t just hit Metaplanet. Other listed companies with large Bitcoin positions also saw their reserves fall below cost, which puts pressure on balance sheets and investor confidence.
Funded Bitcoin Strategy Raises Questions
Critics question Metaplanet’s aggressive purchasing strategy. In late October, the company took out a $100 million loan using Bitcoin as collateral, with the aim of purchasing additional BTC and lowering the average purchase price. Due to the price drop, this leverage construction is now having a detrimental effect.
At the same time, Metaplanet hopes that the price will rise sharply in the next two years. The company’s ambition is to have as many as 210,000 Bitcoin on its balance sheet by the end of 2027, an amount almost equal to Strategy’s entire stock.
Falling share prices add extra pressure
The situation is not without consequences for the share. Over the past month, Metaplanet lost more than 27 percent of its value. Another 6.5 percent was added in the past five days. Concerns from Japan about possible stricter rules for companies with large crypto assets are also putting pressure on the share price.
Yet CEO Simon Gerovich indicates that the concerns are exaggerated. According to him, the possible restrictions only concern companies that poorly monitor internal processes and not Metaplanet.
Source: https://newsbit.nl/metaplanet-krijgt-klap-bitcoinwinst-zakt-39-procent-na-harde-oktobercrash/
