Strive Swaps Debt for Equity, Strategy’s $8B Notes Under Spotlight

TLDR

• Strive priced its Series A Perpetual Preferred Stock SATA at $90 per share in a follow-on offering.
• The offering was expanded to include up to 2.25 million shares through both public issuance and private debt exchanges.
• Strive will use the proceeds to repay Semler Scientific’s 4.25 percent convertible notes due in 2030.
• About 930,000 SATA shares will be exchanged directly with noteholders representing $90 million in principal.
• Remaining proceeds and cash will help repay Semler’s Coinbase Credit facility and support new bitcoin purchases.

Strive has moved to restructure its balance sheet by issuing perpetual preferred equity, a shift that may interest Strategy. On Thursday, Strive priced its Variable Rate Series A Perpetual Preferred Stock SATA at $90 per share, completing a follow-on offering. The company expanded the deal size beyond $150 million, issuing up to 2.25 million shares through public and private placements.

Strive’s Offering Combines Market Sale With Private Debt Exchange

Strive’s offering of perpetual preferred shares combines public issuance with privately negotiated debt exchanges to meet its financing goals. The company stated it would use proceeds to pay down Semler Scientific’s 4.25% Convertible Senior Notes due 2030. These notes are guaranteed by Strive, making the repayment a direct balance sheet improvement.

According to Strive, certain noteholders have agreed to exchange $90 million of these convertibles for SATA shares. The exchange will involve around 930,000 new SATA shares issued directly in return. The remaining proceeds, along with cash and terminated capped call proceeds, will repay more debt.

Strive intends to redeem outstanding convertibles and repay Semler’s Coinbase Credit borrowings using available funds. It may also allocate funds for additional bitcoin purchases. This dual-use of capital reflects a broader strategy to transition from fixed-maturity debt to equity-style instruments.

Strategy May Consider Similar Restructuring Path

With Strategy holding $8.3 billion in outstanding convertible notes, Strive’s actions may provide a workable roadmap. Strategy’s largest convertible tranche is a $3 billion issue maturing on June 2, 2028, with a $672.40 conversion price. This is around 300% above its current trading price near $160.

Strive’s preferred equity carries a variable dividend currently at 12.25% but has no maturity or conversion feature. These shares are treated as equity, which helps reduce reported debt and improve leverage metrics. Bondholders lose conversion rights but gain yield and liquidity, with seniority over common equity.

Strive’s move may appeal to Strategy, as perpetual equity offers flexibility without maturity pressure. The replacement of convertible notes through preferred stock could help reduce refinancing risks. Strategy’s recent preferred securities already exceed its convertibles in notional value.

Strive Converts Fixed Obligations Into Equity-Like Instruments

Strive has shifted from traditional debt rollover to issuing perpetual preferreds to enhance financial flexibility. The SATA shares provide no conversion option, offering fixed yield instead, which appeals to certain investor profiles. Their perpetual structure reduces future redemption risks and boosts capital treatment.

By using preferred equity, Strive improves its capital structure without increasing leverage. The instrument is classified as equity on balance sheets, enhancing flexibility and financial ratios. This structure may ease future funding rounds without triggering debt covenants.

Strive’s approach shows a calculated shift from dated obligations to more durable capital. The firm completed the offering efficiently, showing investor demand for yield-based securities. On Friday, the shares began trading following the closing of the upsized offering.

Strive stated it expects to complete further exchanges and redemptions using excess offering proceeds. It will continue negotiating with remaining noteholders for more exchanges.

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