Metaplanet’s (3350) independent directors have defended the company’s controversial executive stock-rights plan, arguing that management took financial risks during the firm’s turnaround. Their Sept. 29 letter, however, leaves unresolved questions about CEO Simon Gerovich’s exercised shares and MMXX Ventures.

The revised plan allows Gerovich and four other employees to acquire 188 million Metaplanet shares at 10 yen each, compared with the stock’s current price of roughly 286 yen.

The main source of shareholder criticism was the structure of the original plan, which was designed to keep management’s potential stake at around 20% of Metaplanet’s fully diluted shares.

As Metaplanet issued new equity to fund bitcoin purchases, that mechanism increased the potential number of shares available to management while simultaneously diluting existing shareholders.

The original arrangement was approved in 2023, when Metaplanet was still a struggling hotel operator. After the company shifted to a bitcoin-focused strategy in April 2024, every equity raise used to purchase bitcoin diluted existing investors and increased Gerovich’s potential option allocation.

The potential pool grew from about 46 million shares to 319 million before Metaplanet eventually froze the number of reward shares. Gerovich’s rights covered 113 million shares at the time, of which he had already exercised 64 million.

Following the backlash from shareholders, Metaplanet reduced the pool by 41% on Sept. 11.

In their Sept. 29 letter, the independent directors said the original plan was reasonable given the circumstances in which it was created. They also noted that the arrangement had been approved by a majority of shareholders at the time.

The directors said management purchased the rights at fair value using personal funds while the company was experiencing a financial crisis. Metaplanet was then still a struggling hotel operator, and there was no assurance that its planned transformation would succeed.

None of the current independent directors was serving on the board when the rights were issued.

The directors said the arrangement should not be viewed solely as an executive compensation package created after Metaplanet’s bitcoin strategy succeeded. They instead described it as an early investment by executives who accepted financial risk in trying to restructure the company, combined with a long-term incentive tied to its future success.

They also said peer comparisons should account for founder ownership in addition to executive compensation. Management’s cash compensation remained restrained, they added.

The Sept. 11 revision cut the pool to 188.2 million shares and eliminated more than $220 million in potential warrant value, according to the company.

The revised plan also ended automatic adjustments for equity issued after Sept. 1, 2025. It introduced staggered restrictions on the exercise of the remaining rights through 2031, while shares already acquired through exercised rights will remain locked until August 2031.

Metaplanet said the changes improved fully diluted bitcoin per share by approximately 8.8%. The independent directors said exercised and unexercised rights represent about 12.5% of the company’s total shares.

Gerovich, the only director who holds the rights, did not participate in the review’s deliberations or resolutions, according to the directors.

Two major issues remain

The letter does not directly address several issues that have driven shareholder criticism.

One is the 64 million shares Gerovich obtained by exercising his rights in August, before Metaplanet reset the original plan on Sept. 11. Those shares remain outstanding. The company has previously said they will not be returned because the exercises were valid under the terms in effect at the time.

The directors also did not address concerns surrounding MMXX Ventures, a Metaplanet shareholder whose stock sales and Gerovich’s personal economic interest in the entity have drawn investor attention.

MMXX sold Metaplanet shares after the company adopted its bitcoin strategy, while Metaplanet was raising funds through an equity issuance.

Gerovich has said he is a significant but non-majority shareholder in MMXX’s parent company and has no role in its trading decisions.

Metaplanet previously disclosed that it held voting control over MMXX but did not publicly specify the extent of Gerovich’s personal economic interest in the entity’s sales of Metaplanet stock.

Metaplanet shares ended Wednesday’s session 2% higher at 286 yen.

The company issued an update on Sept. 30 adding further context to the controversy surrounding the stock-rights plan.