Strive (ASST), a bitcoin treasury and asset management company, is using perpetual preferred stock to retire convertible debt and restructure its balance sheet, an approach that could offer a blueprint for Strategy (MSTR) in the future.
On Thursday, the company priced a follow-on offering of its Series A Variable Rate Perpetual Preferred Stock (SATA) at $90 per share. The transaction was expanded beyond the initially announced $150 million to allow for the issuance of up to 2.25 million SATA shares in total, combining 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 bondholders representing $90 million in aggregate capital.
Under these agreements, approximately 930,000 newly issued SATA shares will be exchanged directly into convertibles. The remaining net proceeds from the offering, together with cash on hand and potential proceeds from the completion of existing capped call transactions, are expected to be used to redeem or repurchase any remaining Semler convertibles and repay borrowings under Semler Scientific’s Coinbase credit facility, and fund additional purchases of bitcoins.
Instead of refinancing or rolling-dated debt, Strive is converting fixed-maturity obligations into perpetual preferreds. SATA has a variable dividend currently set at 12.25% and has no maturity or conversion features. Because preferred stock is treated as equity rather than debt, this improves reported leverage and flexibility metrics. While bondholders effectively give up the share conversion option in exchange for a higher-yielding, perpetual and fully liquid instrument that also has priority over common shares.
This could be a possible avenue that the Strategy can deploy; has approximately $8.3 billion in convertible bonds outstanding, while its perpetual preferred securities have recently outperformed convertibles in notional value.
Still several years from maturity, the bulk of the convertible bonds remains the $3 billion tranche with a sale date of June 2, 2028 and a conversion price of $672.40, approximately 300% above the current share price of close to $160.
Using preferred stock to retire or exchange such debt could offer CEO Michael Saylor an additional avenue to reduce future maturity risk.
