Strive (ASST), a Bitcoin treasury and asset management company, is using perpetual preferred equity to repay convertible debt and restructure its balance sheet, a method that could offer a template for the strategy in the future (MSTR).
On Thursday, the company priced the follow-on offering of its Variable Rate Series A Perpetual Preferred Stock SATA at $90 a share. The transaction was larger than the initially announced $150 million, combining the public issuance with privately negotiated debt exchanges, allowing for the issuance of a total of 2.25 million SATA shares.
Strive said it intends to use the net proceeds to pay off Semler Scientific’s 4.25% convertible senior notes due 2030, which are guaranteed by Strive. The Company expects to enter into exchange agreements with certain noteholders representing $90 million in aggregate principal amount.
Under those agreements, approximately 930,000 newly issued SATA shares will be directly exchanged for convertibles. The remaining net proceeds from the offering, along with cash on hand and potential proceeds from terminating existing capped call transactions, are expected to be used to redeem or repurchase any remaining Semler convertibles and to repay borrowings under Semler Scientific’s Coinbase Credit Facility and to fund additional Bitcoin purchases.
Instead of refinancing or pursuing dated debt, Strive is converting fixed-maturity obligations into perpetual preferreds. SATA offers a variable dividend which is currently set at 12.25% and has no maturity or conversion facility. Since preferred shares are treated as equity rather than debt, this improves reported leverage metrics and flexibilities. Whereas bondholders effectively give up the optionality of equity conversion in exchange for a higher yielding, permanent and fully liquid instrument, which also has seniority over the common stock.
This could be a potential opportunity to deploy the strategy; It has approximately $8.3 billion of outstanding convertible notes, while its perpetual preferred securities have recently overtaken convertibles in estimated value.
While there are still several years to maturity, the largest tranche of convertible notes is a $3 billion tranche with a June 2, 2028, put date and a $672.40 conversion price, nearly 300% above the current share price near $160.
The use of preferred equity to repay or exchange such debt may provide Executive Chairman Michael Saylor an additional opportunity to reduce future maturity risk.