Compiled by: TechFlow
Guest: Simon Gerovich, CEO of Metaplanet
Hosts: Bonnie & David Lin
Podcast source: Bonnie Blockchain
Summary of highlights
You have to tell all your friends and family and everyone you care about that now is the time to buy Bitcoin.
Bitcoin is an unrivaled monetary asset of unrivaled quality, with no other asset on the market coming close.
Bitcoin is a better version of gold, and it can be called "digital gold." Due to its scarcity and decentralization, Bitcoin should be an important option for every CFO in financial planning, and asset allocation should not be limited to cash.
Bitcoin Finance provides an indirect investment method for investors who have difficulty in directly accessing Bitcoin. The innovation of Bitcoin Finance in this regard is a disruptive change. This trend is like a black hole of capital, attracting a large amount of funds to flow into Bitcoin through Bitcoin Finance.
If you want to invest in a Bitcoin Treasury company, you must make sure that these companies are fully committed and not only will they not sell Bitcoin, but will also make every effort to continuously increase their Bitcoin reserves.
If you ask us whether we will sell Bitcoin, my answer is absolutely not.
Companies that have strong execution, focus, and discipline will receive higher market recognition, while those that do not possess these qualities will be eliminated.
Bitcoin is a unique asset with a limited supply and increasing demand. As more people pay attention to Bitcoin, its price is likely to continue to rise over time.
We are still in the first stage of the Bitcoin journey, which can be called the "gold rush". In this stage, our goal is to accumulate as much Bitcoin as possible. In the second stage, when the price of Bitcoin rises significantly, the stock price will truly reflect the actual value of many listed companies.
Bitcoin is not an ideal form of money in its current state. But it doesn’t need to be a currency either, as it is an excellent store of value.
One of the things that’s great about Bitcoin Reserve is that you don’t really have to innovate, your core business is buying Bitcoin, and the innovation is in how you raise money.
I think there will be multiple Bitcoin superpowers emerging in the future. While the United States may be the largest Bitcoin power at the moment, we hope to help Japan become such a country through Metaplanet.
Bitcoin Assets and Premiums
David:
Today we have invited Simon Gerovich, President of Metaplanet, to discuss with us the future development of Bitcoin asset holdings and the potential application of Bitcoin in the hotel industry.
Bonnie:
The latest news today is that Metaplanet's Bitcoin premium has reached nearly $600 per coin, and some articles say that this price is too high. What do you think? Is the MNAV indicator a good indicator for evaluating Bitcoin asset companies?
Simon:
Recently, many key performance indicators have been proposed to evaluate Bitcoin asset companies. Among them, I think the "Bitcoin yield" is the most important indicator, which reflects the number of Bitcoins held per share by the company and the growth rate. This indicator has become a common tool for sell-side analysts, and Bitcoin asset companies around the world are now using similar evaluation methods. Therefore, when evaluating a company, you cannot rely on a single indicator, but need to consider multiple factors comprehensively.
MNAV (Net Asset Value) is an important reference indicator. It is calculated by adding the enterprise value of the company's market value to its debt and dividing it by the number of bitcoins held by the company. This indicator fluctuates with the market's interest in the company's stock and the activities the company is engaged in. I think Metaplanet's premium is justified. For example, for investors who want to hold Bitcoin directly, tax policies vary greatly from country to country. In Japan, for example, ordinary investors who purchase Bitcoin directly need to pay up to 55% personal income tax. By purchasing shares of listed companies like Metaplanet, investors can indirectly hold Bitcoin in a more tax-friendly way.
This also drives our flywheel effect. The rationality of MNAV depends on many factors, the most critical of which is the company's ability to increase the number of "bitcoins per share". We are currently one of the fastest growing companies in this field in the world, especially in terms of increasing bitcoins per share. We are committed to keeping MNAV between 3 and 5, which will not depress the stock price through excessive issuance of shares, but will effectively increase the value of each bitcoin, thereby creating greater benefits for all shareholders.
A dilemma
Bonnie:
Based on your point just now, I think of a dilemma. Now there are some companies with sufficient cash flow and healthy operations; there are also some companies with difficult operations and struggling. These companies in trouble may choose to transform into Bitcoin financial companies because they are not risky and may gain huge benefits. If the stock prices of these companies soar as a result, even exceeding those of the originally well-run companies, how do you think this situation will develop?
Simon:
I find it interesting that Bitcoin Finance provides an indirect way for investors who have difficulty in directly accessing Bitcoin. After all, almost everyone has a securities account, and buying stocks is a familiar process for them. But if you want people to open an exchange account, it takes an extra step. And considering the hacking incidents of some cryptocurrency exchanges in the past, many people may be discouraged from Bitcoin and cryptocurrency. In addition, some traditional investors' funds are not allowed to buy Bitcoin directly at all, but they can buy stocks of listed companies. So, I think Bitcoin Finance's innovation in this regard is a disruptive change. This trend is like a black hole of capital, attracting a lot of money to flow into Bitcoin through Bitcoin Finance.
Of course, you need to be extra cautious when choosing a Bitcoin finance company. The company's historical performance will become increasingly important. For example, we already have a long-term performance record of 14 months, while Microstrategy has a 5-year record. In addition, the attitude of the CEO is also crucial, such as whether they really believe in Bitcoin? Will they sell their Bitcoin?
Reminds me of a conference I attended in Tokyo a few weeks ago, which was mainly focused on Japanese stocks. Someone asked me at the time, what else would you invest in besides Bitcoin? I showed a very disgusted expression at the time, and this scene was photographed by many people and shared on social media. But I want to emphasize that Metaplanet will only invest in Bitcoin, never invest in other assets, and will not sell our Bitcoin. Michael Saylor has been conveying the same message. So, I think if you want to invest in Bitcoin financial companies, you must make sure that these companies are fully committed, not only will they not sell Bitcoin, but they will also do everything they can to continuously increase their Bitcoin reserves.
Metaplanet’s funding structure changes
David:
Simon, can you talk to us about the initial stages of the company's transformation? You mentioned that the company started out as a struggling hotel business, which sounds interesting. How did you initially raise the funds to buy Bitcoin? How has the funding approach evolved over the years?
Simon:
We owned a series of hotels at the time, and at the initial meeting to discuss the transition to a Bitcoin asset company, we decided to raise startup capital by selling some of our hotels. In addition, we received financial support from a number of like-minded investors, some of whom are also at this meeting today. For example, UTXO Management, a sponsor of the Bitcoin Conference, became one of our early shareholders. At the same time, we also have a very good board of directors, many of whom participated in our private financing at the time.
At the beginning of last year, we used the funds raised to complete our first round of Bitcoin purchases, followed by a rights issue. A rights issue is when a company offers existing shareholders the opportunity to purchase new shares. Traditionally, rights issues are often seen as a negative signal because they are usually only conducted when a company is in urgent need of funds.
But looking back, it was actually the smartest choice we made at the time. We had about 13,000 to 14,000 shareholders who filled out a lot of paperwork and provided us with funds to buy Bitcoin. This also gave our Japanese shareholders an initial connection with the company because their funds were used directly to buy Bitcoin. If you buy stocks on the market now, you are actually buying shares from other sellers; but when you subscribe to new shares, the money goes directly into the company, and you will feel that this money is specifically used to help the company buy Bitcoin. This is how we operated at the time.
This happened last summer, when we raised about $60 million to $70 million. By the end of the year, we launched our first "mobile exercise warrant." This warrant is a financing mechanism similar to the "market-to-market stock offering" in the United States. In the United States, companies can sell new shares directly to the market, such as Microstrategy does; but in Japan, this approach is not feasible. So we designed a structure for mobile exercise warrants, which are issued to partners, who sell shares in the market and use the proceeds to exercise the warrants and ultimately receive newly issued shares. Ultimately, this mechanism works similarly to the "market-to-market stock offering" in the United States.
We have successfully raised a significant amount of capital in this way. We completed our first offering in December of last year, and the most recent one was launched in February of this year and was exercised just last week. We also officially announced that we raised approximately $600 million in equity through this operation. As the company grows in size, we will be able to issue more shares and purchase more Bitcoin. We plan to continue using a similar "at market price" operating model.
Looking ahead, we may issue convertible bonds or preferred stock, but for now we are still focused on the equity financing stage. This financing method is the most efficient because it is permanent capital, does not need to be repaid, and can be used entirely to purchase Bitcoin.
A bunch of copycat Bitcoin companies?
Bonnie:
Back to the topic you just mentioned. Obviously Michael Saylor is a strong supporter of Bitcoin, just like you guys, and Bitcoin Treasury (the company that has Bitcoin on its balance sheet) has a lot of support from the Bitcoin community. Now, many people see your success model and want to copy it. But you were one of the best performing stocks in the world last year, right? This makes people think that your model is a "success secret". However, many people enter this field with the wrong mindset and call themselves Bitcoin companies. What do you think about this?
Simon:
Overall, more companies adopting the Bitcoin standard is a good thing. I think this applies not only to companies like ours that have been struggling, but also to successful businesses that have a lot of idle cash.
Of course, there will always be some bad actors who see this as a shortcut to get rich quick. They may think, "If Bitcoin can drive up my stock price, why shouldn't I do it?" But I believe investors are rational. As more and more Bitcoin treasury companies emerge, it will be easier for investors to compare these companies, such as monitoring their BTC yield (return on investment brought by Bitcoin) and Bitcoin holdings per share through some platforms. In the end, companies with strong execution, focus and discipline will receive higher market recognition, while those that do not have these qualities will be eliminated.
I recently saw a company announce a sale of Bitcoin, and I thought that was a bit silly. They just announced they were buying Bitcoin a few months ago, and now they are selling Bitcoin to realize some profits in the last quarter. This behavior will seriously damage their credibility because investors will no longer see them as a stable Bitcoin investment channel. So, I think over time, the performance of different companies will gradually widen, and investors will become more clear about which companies they support and why they support them.
However, I also understand that different companies may have different motivations for including Bitcoin on their balance sheets. There are many complex factors to consider.
We will always keep buying Bitcoin
David:
Is there a price at which you would stop buying Bitcoin, or at least slow down your purchases? If Bitcoin goes to $500,000 next week, would you still buy it even if its price quintupled in a week?
Simon:
I like your hypothesis. If Bitcoin went to $1 trillion tomorrow, we might consider it overvalued and in need of a re-evaluation, but our plan is to keep buying Bitcoin forever. However, as it stands, Bitcoin is close to its all-time high. Bitcoin is a unique asset with a limited supply and increasing demand. As more people pay attention to Bitcoin, its price will likely continue to rise over time.
If you ask us whether we will sell Bitcoin, my answer is absolutely not. We want shareholders to be free to decide when to buy or sell our shares. Our goal is to be the best leveraged proxy for Bitcoin, and our most important task is to stay focused and disciplined and strictly follow the plan. No matter how the market changes, we will not change our position or make decisions that confuse investors.
Bitcoin asset company growth in two stages
Bonnie:
Michael mentioned that MSTR's leverage is equivalent to 1.5 times that of Bitcoin. Many investors believe that when the price of Bitcoin reaches its historical high, the share price of MSTR or other Bitcoin treasury companies should also reach its historical high. Why is this not the case in reality?
Simon:
I think it's important to look at things from a long-term perspective. Strategically, a company may be in the same position today as it was four or five months ago, but the biggest change is that they have significantly more Bitcoin per share. While the stock price may not fully reflect this, the actual value of the company has increased significantly.
Bonnie:
Yes, but what I want to say is that many people don't really understand Bitcoin. So how should they think about Bitcoin? If you were to explain it to my grandmother who is in her 70s or 80s, what would you say?
Simon:
If your grandmother is in her 70s or 80s, I probably wouldn't recommend that she hold Bitcoin for herself, but she could consider a long-term investment for her children and grandchildren. We are still in the first stage of the Bitcoin journey, which can be called the "gold rush". In this stage, our goal is to accumulate as many Bitcoins as possible. The total amount of the entire Bitcoin network is only 21 million, and our company currently holds more Bitcoins than any other public company, and almost no one can catch up. We want to be the leader in the industry. In the second stage, when the price of Bitcoin rises significantly, the stock price will truly reflect the actual value of many public companies. In this process, the supply and demand mechanism, the volatility of Bitcoin prices, the volatility of stocks, and the ability of companies to execute financing will have an important impact on the results.
In this first stage, people need to understand that the stock price does not always reflect the intrinsic value of the company. Just like in the early days of Amazon, the stock price did not perform well despite the growth of revenue because of the small profits. At that time, Amazon reinvested most of the earnings into advertising, marketing and network expansion. So, I think any investor who invests in Bitcoin Treasury should not have the goal of short-term profit. Similarly, if you invest in Bitcoin, you should not aim for short-term gains. But in the medium and long term, Bitcoin Treasury has the ability to bring higher returns by increasing the number of Bitcoins per share. By buying shares of Bitcoin Treasury, you can let the company do the heavy lifting for you, such as the reserve and management of Bitcoin. After a few years, when you look back, you will find that your Bitcoin investment exposure has increased significantly.
Bitcoin asset companies are in the explosive growth phase
Bonnie:
You mentioned earlier that we are in phase one, right? It's a wild west gold rush, and we need to wait for phase two to come. So when will phase two come?
Simon:
The second phase may come in three to five years, or even five to seven years. By then, Bitcoin will be widely adopted around the world, and its price may exceed $1 million or even $5 million. By then, banks will have the ability to custody Bitcoin. If you have your own treasury, stock portfolio, or even real estate, you can deposit these assets in a bank and get a loan with them. At present, such a function has not yet been realized in the Bitcoin field. Although some banks have announced plans to provide Bitcoin custody services, it will take time to really land and provide more attractive interest rates for Bitcoin.
In the second phase, Bitcoin will become an important part of a high-quality balance sheet. I hope that by then, we will be able to hold trillions of dollars of Bitcoin on our balance sheet. These Bitcoins can be deposited in major banks, and loans can be obtained at low interest rates. Then, the funds can be used to acquire companies that focus on the Bitcoin ecosystem. For example, apply for a digital bank license, or acquire a local bank to provide customers with Bitcoin-related financial services. The second phase will be full of possibilities, because having Bitcoin as a high-quality balance sheet will open up a whole new space for companies to develop.
International Game Theory
Bonnie:
I was talking to the head of an Asian exchange the other day and he mentioned a point: the US may have gained an advantage in Bitcoin because almost all transactions are now denominated in US dollar stablecoins. Does this mean that other countries have fallen too far behind to catch up?
Simon:
I think it will take time for Bitcoin to become popular. Also, the US strategy in the field of Bitcoin may be more deliberate than we think. I believe that the US is actually buying Bitcoin behind the scenes, but it is not public. If they publicly announce every purchase, it will push up the price of Bitcoin and prevent them from continuing to buy at a lower price. But at the same time, there are many countries that are publicly disclosing their Bitcoin purchases. For example, El Salvador and Bhutan are typical examples of public purchases of Bitcoin. I also learned that some countries in the Middle East are also announcing their Bitcoin holdings in different ways. Therefore, I think there will be multiple "Bitcoin superpowers" rising in the future. Although the United States may be the largest Bitcoin power at present, I believe that other countries also have the opportunity to occupy an important position in this field.
We hope to help Japan become that country through Metaplanet. Currently, Metaplanet is the largest Bitcoin holding company in Japan and Asia. We hope that through our efforts, we can encourage Japan to follow the footsteps of the United States in the field of Bitcoin. So even if you think that Bitcoin is slow to be adopted now, don't be disappointed. All this takes time, which also means that we have more opportunities to buy Bitcoin before the price rises to a point where it is unaffordable for ordinary people.
You have to tell all your friends and family and everyone you care about that now is the time to buy Bitcoin.
Japan's unique demand for Bitcoin
Bonnie:
I remember you mentioned in an interview that if investors in the Japanese market want to get involved in Bitcoin assets, they basically need to go through your company. Is that right?
Simon:
There are actually multiple options on the market. Investors can buy Bitcoin directly through local exchanges, but doing so will face a higher tax burden. Therefore, when investors want to invest in Bitcoin in a more tax-friendly way and get returns that exceed Bitcoin itself, they often choose us. The returns of buying Bitcoin directly depend entirely on the fluctuations of Bitcoin prices; and if you invest through a Bitcoin ETF in the United States, due to the correlation between ETFs and Bitcoin prices, investors' returns will generally not exceed the performance of Bitcoin itself. In contrast, the advantage of Bitcoin Finance is that we are an operating company that can flexibly use a variety of capital market tools, such as issuing stocks, convertible bonds or preferred stocks, to effectively increase the value of each Bitcoin share.
Bonnie:
What is the difference between the three metrics you mentioned - Bitcoin per share, BTC earnings, and BTC gain?
Simon:
"BTC gains" refers to the growth rate of the number of Bitcoins per share between different periods. This year, our BTC gains are about 190%, which means that we have successfully increased the number of Bitcoins per share by 190%.
"BTC gain" converts BTC earnings into a specific number of Bitcoins. The calculation method is to multiply the Bitcoin holdings at the end of the previous period by the BTC earnings. Taking our company as an example, this year we added about 3,500 Bitcoins through Bitcoin operations (dilution factors have been taken into account). Then, multiply these 3,500 Bitcoins by the current Bitcoin price to get the "BTC dollar gain".
This metric is mainly to help traditional financial markets understand the actual value we create behind the scenes. This year, our BTC dollar gain is about $400 million. I prefer to think of it as a manifestation of profit, although it is not a true accounting profit, it does show potential value creation. If calculated on an annualized basis, our BTC dollar gain has the potential to reach $1 billion. So, what should the valuation of a company that can create $1 billion in value for shareholders every year be?
The challenge is that traditional financial markets have limited tools when evaluating companies. They can only use traditional frameworks, such as revenue and profit. However, Bitcoin Finance is different from traditional operating companies. We do not have significant revenue, nor are we profitable in the traditional sense. Therefore, other evaluation tools are needed, such as BTC revenue, BTC gain, and BTC dollar gain, which can help analysts better understand the value created by our company.
Becoming a Bitcoin Company Metaplanet
David:
Before we discuss your philosophy on Bitcoin, I would like to know your opinion on Metaplanet. Your company is often compared to Microstrategy, and some even call you "Microstrategy of Asia". What do you think about this?
Simon:
I feel very honored to be compared in this way. Michael Saylor has had a profound influence on me. I often mention that during the pandemic, when my hotel business was in dire straits, I found some comfort by listening to Michael Saylor's podcast. He shared his vision for how public companies could transform and accept Bitcoin, which was almost unimaginable at the time.
This inspired me to make a decision to transform our struggling hotel business, and therefore, over the past year, adopting Bitcoin as our core treasury asset has completely changed our situation.
David:
As you pushed for this transition, were there any resistance from investors? How did you address that resistance, especially given that Bitcoin was a completely new asset class unrelated to your core business?
Simon:
It was a blessing in disguise, because we were not doing well and had no choice but to turn around. The board and shareholders said to me, "Simon, think of something, anything that can save the company." So I didn't encounter much opposition in the board.
But it reminds me of a few years ago when the company was doing well and I proposed to the board that we accept Bitcoin in our hotels. At the time, it seemed like a very natural next step, but I was laughed at by the board.
They asked me why we should risk our business with such an unpopular currency like Bitcoin? So I had to give up the idea. But I kept thinking whether there would be an opportunity to integrate Bitcoin into our core business in the future. In the end, we realized it at the right time.
Local Currency vs Bitcoin
David:
How much does the performance of the domestic currency play a role in your new Bitcoin acquisition strategy? For example, the Japanese yen has continued to depreciate against the US dollar and other currency baskets over the past 15 to 20 years. Would you have made such a shift if this had not happened?
Simon:
Absolutely. I think Bitcoin is an unrivaled superior monetary asset, and there is nothing else on the market that can compare to it. If you are in a market where the currency is depreciating, such as the United States, you will find a lot of people talking about the excessive printing of dollars and the country's huge debt burden.
The situation in Japan is similar. Many G7 countries are facing similar problems. Japan is the most indebted country in the world as a percentage of GDP, which is very significant. The purchasing power of the yen has dropped significantly. Before, many Japanese could proudly go on vacation to Hawaii, but now it is difficult to do so because of the depreciation of the yen. But I think this is not just a problem with the yen or the dollar, but a problem with the entire fiat currency system. The government can print these currencies at will, which means that your hard-earned wealth may be diluted by the arbitrary printing of currency. Therefore, fiat currency is not a good choice for long-term wealth storage.
Bitcoin and Deflation?
David:
As we all know, Bitcoin is considered to be resistant to inflation. What about in the case of deflation? For example, Japan experienced deflation in the early 90s and later. If the purchasing power of cash increases over time in such an environment, what theoretical value and demand does Bitcoin have as an asset?
Simon:
That's a very deep question. However, I think prices are starting to recover now. Japan went through a huge asset bubble, which was mainly driven by the post-war economic reconstruction. I remember when I lived in Japan in the 80s, people even wrote books saying that Japan was "number one in the world". I also hope that Japan will reach such heights again one day. But it was indeed a slide from an absolute peak, and now inflation has reappeared.
In an environment where the value of a currency increases over time, i.e., in a deflationary environment, the reasons to buy Bitcoin may not seem so obvious. But Bitcoin has a key feature: its total amount is fixed, only 21 million. Even currencies that appreciate in value cannot directly compare to this feature of Bitcoin. Therefore, the value of Bitcoin does not depend on any single monetary system, and it can exist independently. Compared with the phenomenon of massive money printing and inflation around the world, Bitcoin is undoubtedly the best value storage tool at present.
Why don’t people just buy Bitcoin directly?
Bonnie:
You own so many bitcoins. How do you ensure the safety of these assets?
Simon:
One of the significant advantages of Bitcoin Treasury Company is that it helps users overcome many of the technical obstacles to holding Bitcoin. As we mentioned before, losing your private key means that your Bitcoin is lost forever, unlike a bank password that can be retrieved over the phone. Once you lose your Bitcoin, you can never get it back. Therefore, if you choose to invest in Bitcoin Treasury Company, or invest in Bitcoin through an ETF, you can sleep soundly knowing that your Bitcoin assets are in safekeeping.
In fact, many Bitcoin holders do not tell their spouses or children their private key information. If something unexpected happens, these Bitcoins may be gone forever.
As a company, we take transparency very seriously. We publish all of our Bitcoin public addresses on our dashboard. This practice is critical to earning the trust of our investors and Japanese shareholders. In addition, we are required by law to hold Bitcoin in a third-party custodian approved by regulators. Therefore, we strictly adhere to this regulation. As our Bitcoin holdings increase, we will introduce more professional custodians to ensure the security of our assets. We always choose the best custodians and spread our assets among multiple institutions to reduce risks.
Will Bitcoin asset companies never sell?
Bonnie:
If a company claiming to be a Bitcoin reserve company engages in buying low and selling high, and they are very good at it, what impact will this behavior have on the entire system? We all agree with Michael Saylor's long-term Bitcoin holding strategy, but if I choose to sell my Bitcoin, what consequences will there be besides disappointing investors?
Simon:
Then you are not a real Bitcoin reserve company. I think that a company engaged in Bitcoin trading is more like a Bitcoin hedge fund. The main purpose of a Bitcoin hedge fund is to make a profit in the Bitcoin market through various trading strategies, and there are indeed many investment tools on the market that can help you achieve this.
I know some tools focus on using Bitcoin-related trading strategies to gain returns, but this is completely different from the philosophy of Bitcoin Reserve. We need to increase the number of Bitcoins per share over time, which requires continuous accumulation of Bitcoin, not selling it.
Would you like to pay with Bitcoin?
David:
Why don’t hotels accept Bitcoin as payment for rooms now? Will this change in the future?
Simon:
This reminds me of the story of Bitcoin pizza. In the early days, someone bought two pizzas with 10,000 Bitcoins, and then the price of Bitcoin soared to a million dollars. If you pay for a night's room with Bitcoin, and Bitcoin rises to $1 million, then it becomes a very expensive room for one night.
David:
It’s hindsight, but you can’t predict what the price of Bitcoin will be tomorrow. Isn’t that why Bitcoin isn’t widely used as a payment tool yet? Because everyone believes that its value will continue to rise.
Bonnie:
Indeed, people may be more inclined to spend weaker currencies.
David:
Do you think there will be a day in the future when not only Bitcoin but also stablecoins will be widely used for hotel payments or other blockchain-based transaction scenarios?
Simon:
Blockchain is essentially just a ledger, and there are many types of ledgers on the market. In Japan, people are already very accustomed to using electronic money. You can pay with your phone at a hotel. In the United States, Apple Pay is very popular. For consumers, transaction speed is the most important. When buying coffee with Bitcoin in the early days, you had to wait 15 minutes for the transaction to be confirmed. In the current situation, Bitcoin is not an ideal form of currency. But it does not need to be a currency because it is an excellent means of storing value. In the future, there may be some Bitcoin-based applications that make micropayments a reality.
However, as a hotel company or other business, it is a smart choice to accept Bitcoin payments. This will gradually increase your Bitcoin holdings and keep them as an asset reserve. But the reality is that most companies need to use their income to pay for daily expenses. If you are a hotel company, profits are usually very slim, which means you may not be able to keep your Bitcoin income for a long time and have to sell it to pay for operating costs. However, I believe that more and more companies will choose to accept Bitcoin as a payment method in the future. In the Middle East, many people have already used Bitcoin to buy cars and apartments. The sellers are willing to accept it because they are optimistic about Bitcoin as an asset with long-term appreciation potential.
Metaplanet Story
Bonnie:
Michael Saylor talked about how he started investing in Bitcoin, and he mentioned that during the pandemic, the company needed to compete with big companies like Microsoft. What is your story?
Simon:
Honestly, my story isn’t that complicated. We were under tremendous pressure. Our hotels were forced to close, and we were asked to shut down our hotels in three of our four markets in Southeast Asia and Japan. Revenues were completely zero, but expenses were still going on. We were in an existential crisis and had to figure out how to survive. Our auditors added a “going concern warning” to our financial reports, which basically reminded us that we didn’t have enough cash to sustain the company for the next 12 months. It was a really tough time.
Inspired by Michael Saylor, I shared some of his ideas at the board meeting, and the response was very positive. So we decided to hold a shareholder meeting and propose to shareholders to invest in Bitcoin as a core financial asset. When we announced this plan, the market responded quickly and positively, which made us more determined in this direction. Now, our Bitcoin strategy has been implemented for 13 or 14 months, and I am very excited about the future development, and I am willing to face higher expectations and challenges.
Bonnie:
How did this story develop? Were you already buying Bitcoin before this? Or did you learn about it through YouTube? First of all, you have to believe in Bitcoin and the strategy to proceed, right? So how did your story come about?
Simon:
I actually started buying Bitcoin in late 2012 to early 2013. I was living in Japan at the time and used Mt. Gox, which was the first platform for many early Bitcoin buyers to get in touch with Bitcoin. It can be said that I have been a long-term Bitcoin enthusiast. This interest has also helped me when I was running my hotel business. Whenever the hotel business encountered difficulties and I felt frustrated, I would think of Bitcoin and cheer myself up again. For many years, I have been looking for opportunities to combine my interests with business, and the crisis during the epidemic gave me just such an opportunity.
Bitcoin is a moral responsibility
David:
I remember you once said that Bitcoin is a moral responsibility. What does that mean?
Simon:
I would say it is a moral obligation. I think it is my responsibility and others in the industry to help more people understand Bitcoin. In Japan, it is not easy to get access to Bitcoin at the moment. The way to obtain Bitcoin through private transactions is not common and has low exposure. Also, the process of opening an account is very complicated. Since the Mt. Gox incident, Japan has strengthened its regulation of digital assets, which is necessary, but it also means that many traditional regulatory rules still exist, increasing the barrier to entry. Therefore, we hope to provide Japanese investors with a simpler and tax-friendly way to buy Bitcoin.
In addition, we have obtained the publishing license for Bitcoin Magazine in Japan. We published the first issue in March this year, and the next issue will be released at the end of June. Through this magazine, we hope to guide Japanese people to better understand Bitcoin. We believe that it is our responsibility to educate people and improve their financial knowledge. Therefore, the goal of Bitcoin Magazine is not to make a profit, but to serve as a platform to spread the story of Bitcoin.
In addition, we have retained a hotel and renamed it "Bitcoin Hotel". This is an opportunity for people to get in touch with Bitcoin in real life. People can come here to experience hotel services and visit the Bitcoin Art Museum. We plan to cooperate with Bitcoin artists around the world to display their creations. In addition, we will set up a Bitcoin Museum to introduce the history and development of Bitcoin. There may also be a wax figure of Satoshi Nakamoto in the hotel lobby for people to take photos and check in. Of course, we would be very happy if you can come and visit the hotel when it opens at the end of next year.
Metaplanet Future Strategy
David:
Speaking of hotels, in addition to the function of accommodation and rest. Simon, what are Metaplanet's plans for the future? You have successfully turned the company around through effective strategies. Do you have any new strategic progress at present? Do you have any expansion plans? Now there is only one hotel left, will you consider purchasing more hotels?
Simon:
No. We keep the hotel because it is an asset from the old days. There are many reasons to keep it, not the least of which is that the operating losses associated with the hotel are tax deductible. This means that as long as we keep the hotel, we can use its tax losses to offset the gains of other businesses in the future. So for us, keeping the hotel is very valuable. But in addition to the hotel, we have now completely transformed into a company that is 100% focused on Bitcoin.
One of the bright spots of Bitcoin Reserve is that you don’t really need to innovate, your core business is buying Bitcoin, and the innovation is in the way you raise funds. So our main way of raising funds now is mobile exercise warrants, which is similar to a market equity offering.
Does every company need to have Bitcoin on its books?
David:
So what do you think of companies that have a hybrid strategy? For example, Elon Musk once bought a lot of Bitcoin for Tesla, but they are not a company that focuses on Bitcoin vaults. Tesla incorporated Bitcoin into its financial system at some point, probably for different reasons than Metaplanet. For companies whose core business does not revolve around Bitcoin, do you think they should include Bitcoin in their asset allocation as a cash alternative?
Simon:
Absolutely. As we have discussed before, Bitcoin is a very meaningful choice as an asset. Idle cash will lead to depreciation, which is what we don't want to see. I understand that some Asian companies already hold gold and Bitcoin on their balance sheets, and I think Bitcoin is a better version of gold. It can be called "digital gold." Due to the scarcity and decentralization of Bitcoin, it should be an important option for every CFO in financial planning, and asset allocation should not be limited to cash.
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