Metaplanet becomes a new target for Arbitrage, what happened as the stock price has locked in a pump for two consecutive days?

The Japanese version of MicroStrategy, Metaplanet, has recently experienced significant price fluctuations, ranking first in volatility and also being the company with the highest short-selling ratio. At the same time, Metaplanet, listed in both Japan and the United States, has become a new target for arbitrageurs, providing a new choice for arbitrage not only through Bitcoin and stock price fluctuations like MicroStrategy Strategy but also by utilizing its multiple-listed stocks.

Japan's first Bitcoin reserve strategy company Metaplanet

The Japanese version of MicroStrategy, Metaplanet, is Japan's first publicly listed "Bitcoin Reserve Strategy Company" (Bitcoin Treasury Reserv Company), which uses Bitcoin as its primary financial reserve asset. The company raises funds through the issuance of stocks and bonds, continuously increasing its Bitcoin holdings to enhance the per-share Bitcoin yield (BTC Yield) as the core performance indicator.

(Strategy leads the trend, a detailed article on the Bitcoin reserve strategy company investment guide)

In just over a year, Metaplanet has become the publicly listed company with the most Bitcoin in Asia. This strategy has garnered significant attention in the Japanese market and has also been included in multiple global and local ETFs.

Metaplanet stock 3350.T has been listed on the Tokyo Stock Exchange in Japan for many years. It will begin trading on the U.S. OTCQX market on December 19, 2024, with the stock code MTPLF. It is a listing form known as Foreign Ordinary Share ( foreign ordinary share ). Both represent the same company, just traded on different markets.

This move aims to attract more international investors, especially American institutions and retail investors interested in its Bitcoin strategy. Company CEO Simon Gerovich stated that this is an important step in expanding global investor participation in the development of Metaplanet.

Why conduct multiple listings?

When a company is simultaneously listed on exchanges in different countries, ( it is called dual listing or cross-border listing ), which typically has the following characteristics and restrictions:

Increase capital liquidity: Companies can attract investors from different markets, increasing the trading volume and liquidity of their stocks.

Expand the investor base: Investors from different regions can more easily purchase company stocks, increasing the company's global influence.

Enhancing corporate image and reputation: Listing in multiple markets can make the company more international, contributing to an increase in brand value.

Reduce capital costs: Companies can leverage the funding conditions of different markets to find lower financing costs.

Foreign exchange and market opportunities: It can reduce the risks of a single market and take advantage of markets with more favorable exchange rates or economic environments.

However, multiple listings also increase compliance costs and liquidity management constraints.

Like Alibaba's initial public offering in 2014 on the New York Stock Exchange (NYSE), which set the record for the largest IPO in the world at that time. Later, to make it easier for Chinese investors to invest, Alibaba conducted a secondary listing on the Hong Kong Stock Exchange (HKEX) in 2019, successfully attracting more capital from the Asian market.

Should the stock prices on both sides of a dual listing be the same?

Typically, the stock prices of companies with multiple listings on different exchanges do not match exactly, primarily influenced by the following factors:

Market supply and demand: The composition of investors and trading habits of different exchanges vary, which may lead to higher stock demand in one market, resulting in price increases, while another market may have lower demand.

Foreign exchange rates: If a company is listed in different countries, the stock price will be affected by the local currency exchange rates. For example, Alibaba is listed in the US and Hong Kong, and its stock price will vary due to fluctuations in the exchange rate between the US dollar and the Hong Kong dollar.

Trading hours: The opening and closing times of different markets vary, and the time at which news affects stock prices also differs. For example, when the US exchanges open, the Asian market may already be closed, so global events may impact stock prices in one location but have not yet been reflected in another market.

Liquidity: Different trading volumes in stocks may affect stock prices. For example, if a market is more active, stock prices may be more stable; whereas a market with lower trading volume may experience greater fluctuations due to single transactions.

Exchange price fluctuation limits: The rules vary by exchange; for example, US stocks have no price fluctuation limit, while the limit for Taiwan stocks is 10%.

What is the difference between MTPLF and 3350.T?

Like Metaplanet, which is listed in both Japan and the United States, the main difference in stock prices comes from the exchange rate, as can be seen from the figure below, since the purple line in the figure below ( MTPLF ) since its listing in the United States, its share price and the 3350.T listed in Japan ( the column ) below Presenting a step-by-step performance.

But actually, the fluctuation between the two stocks in recent days has been quite astonishing! We compared last week's stock prices after converting them using the exchange rate as shown in the table below, and found that the price difference between the two reached as high as 137%! This is because there are no limits on price changes in US stocks, while Japanese stocks do have restrictions, and 3350 was locked at the upper limit on both 5/21 and 5/22, which caused the inability to have further price changes.

Metaplanet becomes a new target for arbitrageurs.

MTPLF has recently become the most actively traded stock on the OTC market, while Metaplanet (3350.T) is also the most shorted stock in Japan.

This may be caused by many institutions, professional investors, and market makers arbitraging from it.

Famous short-seller Jim Chanos recently stated in an interview with CNBC that practices like Strategy, which uses fundraising to buy Bitcoin and then claims "we have Bitcoin" to boost the company's valuation, are extremely absurd. He suggests that people can go long on Bitcoin while shorting the company's stock for arbitrage.

( Well-known short investor Jim Chanos: Go long on Bitcoin + short MicroStrategy for arbitrage )

In addition to buying Bitcoin while shorting Metaplanet, traditional financial investments may be better at arbitrage trading of Metaplanet stocks listed in Japan and the United States!

But Metaplanet CEO Simon Gerovich seems not worried at all about Metaplanet and is heavily shorting it. He proudly stated that Metaplanet is the most volatile stock in Japan, and said:

Volatility is the pulse, it is the flame, it is the fuel, and Bitcoin is the spark that keeps it burning!

He acknowledged that Metaplanet is the most shorted stock in Japan and questioned:

Do they really think that shorting Bitcoin is a successful strategy?

This article Metaplanet has become a new target for arbitrage, with its stock price locked in daily limits for two consecutive days. What happened? It first appeared in Chain News ABMedia.