Strive (ASST), a NASDAQ-listed Bitcoin asset management company BTC$107,661.53 Financial Strategies on Monday announced plans for an initial public offering of a new class of preferred stock intended to pay dividends.
The Series A Floating Rate Perpetual Preferred Stock, known as SATA, initially aims to pay an annual dividend of 12% monthly in cash. The company plans to offer investors 1.25 million SATA to acquire more BTC to raise funds to expand its operations, but the proceeds could also be used to buy back income-producing assets, working capital, or common stock. Strive currently holds just under 6,000 BTC, worth approximately $637 million at current prices, but that amount will increase to approximately 11,000 coins once the all-stock merger with Semler Scientific (SMLR) is completed.
Since completing its SPAC deal a few weeks ago, Strive is trading at a discount to the value of Bitcoin on its balance sheet (mNAV less than 1) due to the near-relentless decline in its common stock. Therefore, issuing common stock to purchase Bitcoin on an ongoing basis would be highly dilutive to existing shareholders.
The move to issue preferred stock instead follows in the footsteps of pioneering Bitcoin treasury firm Strategy, which began issuing different classes of preferred stock to expand its financing options for BTC purchases.
Kudos once again to Saylor and the team. Strive said he plans to maintain SATA’s trading range between $95 and $105 per share by adjusting the dividend rate within established limits. According to the press release, once the dividend is unpaid, the interest rate increases month by month, eventually reaching up to 20% annually.
Barclays and Cantor Fitzgerald are acting as joint bookrunners for the offering, with Clear Street acting as joint manager. A dividend reserve of $12 per share is set aside to cover the first year of dividends.
ASST stock fell 2.3% on Monday as the price of Bitcoin fell 4% to $106,000. SMLR fell 2.5%.
The proposal comes as digital asset government bond stocks have plummeted over the past few months, with many now trading below the value of their underlying holdings, limiting their ability to raise new funds to continue buying cryptocurrencies.
