Strive (ASST), a bitcoin finance and asset management company, is using perpetual preferred equity to retire convertible debt and restructure its balance sheet, a method that may offer a template for strategy (MSTR) in the future.
On Thursday, the company priced a follow-on offering of its Variable Rate Series A Perpetual Preferred Stock SATA (SATA) at $90 per share. The transaction was increased beyond the originally 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 noteholders representing $90 million in aggregate principal amount.
Pursuant to these agreements, approximately 930,000 newly issued SATA shares will be exchanged directly for the convertibles. The remaining net proceeds from the offering, together 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 repay borrowings under Semler Scientific’s Coinbase Credit Facility and fund additional bitcoin purchases.
Instead of refinancing or rolling dated debt, Strive converts fixed-term obligations into perpetual preferences. SATA has a variable yield currently set at 12.25% and has no maturity or conversion feature. Because the preferred stock is treated as equity rather than debt, this improves reported leverage metrics and flexibility. Whereas bondholders effectively give up equity conversion option in exchange for a higher yielding, perpetual and fully liquid instrument that also has seniority relative to common stock.
This could be a possible path that Strategy can implement; it has about $8.3 billion in outstanding convertible bonds, while its perpetual preferred securities have recently surpassed convertibles in face value.
Still several years after maturity, the largest portion of the convertible bonds is still the $3 billion tranche with a sale date of June 2, 2028 and a conversion price of $672.40, about 300% above the current share price near $160.
The use of preferred equity to retire or exchange such debt could offer executive chairman Michael Saylor an additional opportunity to reduce future maturity risk.
