Strive (ASST), a Bitcoin treasury and asset management company, is using perpetual preferred equity to pay down convertible debt and restructure its balance sheet, a method that could offer a model strategy (MSTR) in the future.
On Thursday, the company priced a follow-on offering of its Series A SATA Floating Rate Perpetual Preferred Stock (SATA) at $90 per share. The transaction was increased beyond the $150 million initially announced to enable the issuance of up to 2.25 million SATA shares in total, combining the public issuance with privately negotiated debt swaps.
Strive said it intends to use the net proceeds to repay 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 the terms of these agreements, approximately 930,000 newly issued SATA shares will be exchanged directly for convertibles. The remaining net proceeds from the offering, together with available cash and potential proceeds from the termination of existing capped call transactions, are expected to be used to repurchase or repurchase all remaining Semler convertibles and repay borrowings under Semler Scientific’s Coinbase credit facility, and fund additional purchases of bitcoin.
Rather than refinancing or rolling over debt, Strive converts fixed maturity bonds into perpetual preferences. SATA carries a variable dividend currently set at 12.25% and has no maturity or conversion feature. Since preferred shares are treated as equity rather than debt, this improves the reported leverage measures and flexibility. While bondholders effectively give up the stock conversion option in exchange for a higher yielding, perpetual, fully liquid instrument, which also takes priority over common stock.
This could be a possible avenue that the strategy could deploy; it has approximately $8.3 billion in convertible notes outstanding, while its perpetual preferred securities have recently surpassed convertible securities in notional value.
Still several years after maturity, the largest portion of the convertible notes remains the $3 billion tranche with a sale date of June 2, 2028 and a conversion price of $672.40, or about 300% above the current stock price of near $160.
Using preferred stock to repay or exchange such debt could provide Executive Chairman Michael Saylor with an additional avenue to reduce future maturity risk.
