Bitcoin vault and asset manager Strive (ASST) is using perpetual preferred stock to pay down convertible debt and restructure its balance sheet, an approach that could provide a template for future Strategy (MSTR).
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 deal, which exceeds the initially announced $150 million and totals up to 2.25 million SATA shares, combines a public offering with a privately negotiated debt exchange.
Strive said it plans 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 for an aggregate principal amount of $90 million.
Under these agreements, approximately 930,000 newly issued SATA shares will be exchanged directly for convertible bonds. The remaining net proceeds from the offering, plus cash on hand and potential proceeds from the termination of existing capped call transactions, are expected to be used to redeem or repurchase any remaining Semler Convertible Notes, repay borrowings under Semler Scientific’s Coinbase Credit facility and fund additional Bitcoin purchases.
Rather than refinancing or rolling term debt, Strive converts fixed-maturity debt into perpetual preferred stock. SATA’s variable dividend is currently set at 12.25% and has no expiry date or conversion feature. Since preferred stock is treated as equity rather than debt, this improves reported leverage metrics and flexibility. The bondholders effectively give up their equity conversion option in exchange for a higher-yielding, permanent and fully liquid instrument that also has priority over the common stock.
This could be one possible avenue in which the strategy could be deployed; the company has about $8.3 billion in convertible notes outstanding, and the nominal value of its perpetual preferred securities recently surpassed its convertible notes.
With a few years to go until maturity, the largest portion of the convertible notes remains the $3 billion tranche, with an option date of June 2, 2028, and a conversion price of $672.40, which is approximately 300% higher than the current share price of nearly $160.
Using preferred stock to repay or exchange such debt could provide executive chairman Michael Saylor with an additional way to reduce future maturity risk.