In a significant move within the financial landscape, Strive (ASST), a bitcoin treasury and asset management firm, has announced its strategic approach to restructure its balance sheet through the issuance of perpetual preferred equity. This method is notably positioned to serve as a potential model for Strategy (MSTR) in its future financial maneuvers.
Recently, Strive priced a follow-on offering of its Variable Rate Series A Perpetual Preferred Stock, known as SATA, at $90 per share. The initial offering of $150 million was expanded, allowing for the issuance of up to 2.25 million SATA shares. The adjustment in the offering not only reflects a robust demand but also combines public issuance with privately negotiated debt exchanges.
The net proceeds from this offering are earmarked for paying down Semler Scientific’s 4.25% Convertible Senior Notes, which are due in 2030 and guaranteed by Strive. The company plans to enter into exchange agreements with specific noteholders who collectively hold $90 million in principal value. As part of these agreements, approximately 930,000 newly issued SATA shares will be exchanged for the convertible notes.
In addition to these efforts, the remaining proceeds, along with available cash and funds from terminating capped call transactions, are intended to redeem or repurchase any remaining convertible notes from Semler. This plan also encompasses repaying borrowings under Semler Scientific’s Coinbase Credit facility, and supporting further bitcoin purchases.
Rather than opting for traditional refinancing of maturing debt, Strive has chosen to convert its fixed-maturity obligations into perpetual preferred shares. With a variable dividend currently set at 12.25%, SATA shares do not come with a maturity or conversion feature. This classification of preferred shares as equity rather than debt enhances the company’s reported leverage metrics and overall financial flexibility. For bondholders, this shift means trading equity conversion options for a higher-yielding, fully liquid instrument that has seniority over common equity.
This innovative approach could serve as a potential strategy for Strategy, which currently faces a substantial $8.3 billion in outstanding convertible notes. Notably, the value of its perpetual preferred securities has recently eclipsed that of its convertible notes. Among these convertible notes, a significant portion includes a $3 billion tranche that is set to mature on June 2, 2028, featuring a conversion price significantly higher than the current share price of around $160.
Employing preferred equity to retire or exchange such debt could provide Strategy’s executive chairman, Michael Saylor, with an effective avenue to mitigate future maturity risks. This emerging trend highlights a shift in how companies may address their debt structures in light of evolving market conditions and investment strategies.
