The company closed its upsized $630 million offering of SATS perpetual preferred stock on Tuesday. The shares were near $86.98 in their first afternoon. Strive has not said how much of the roughly $608 million in net proceeds will go to bitcoin.
The size of Strive's raise shows there is still money for bitcoin treasury companies. The price shows what it costs.
Strive said on Tuesday that it had closed its upsized initial public offering of 7 million shares of 15.00% Series A Perpetual SATS Preferred Stock at $90 a share, raising about $630 million before discounts and expenses. The preferred began trading on the Nasdaq Global Market on Tuesday under the ticker SATS. Net proceeds were about $608 million.
SATS was quoted at about $86.98 at about 2 p.m. Eastern, about 3.4% below the offer price. Strive's common stock was up $1.16, or about 4.5%, at $26.70.
The cost of capital
The 15% dividend is calculated on a stated amount of $100 a share, not on the $90 offer price. An investor who paid $90 receives $15 a year, a yield of about 16.7%. At Tuesday afternoon's price of $86.98, the yield is about 17.2%. Dividends are cumulative from issuance and, if declared, are payable each business day starting Nov. 9.
A preferred stock that yields more than 16% from its first trade is expensive funding for any company. For a bitcoin treasury company, it sets a high bar: the bitcoin purchased with the money has to rise faster than the dividend for common shareholders to benefit.
"We believe maintaining a high Amplification Ratio is the most important driver of our ability to outperform Bitcoin over time," Chief Executive Matt Cole said, referring to the ratio of the company's debt and preferred stock to the value of its bitcoin.
Where the money goes
Strive has not said how much of the proceeds will buy bitcoin. Its filings list general corporate purposes, including bitcoin purchases, working capital, income-generating assets, share buybacks and acquisitions.
The scale is still significant. At about $82,700 per coin, $608 million would buy about 7,350 bitcoin. Strive reports holdings of 36,818 bitcoin. A full allocation would take it above the roughly 44,000 coins reported by Metaplanet, though Strive has not committed to one.
Market implications
One reading is that demand for the model is intact. Strive upsized the offering and placed $630 million at a time when bitcoin is below its October highs and treasury-company shares have been under pressure.
A second reading is that funding is getting fragile. A 15% coupon on $100 of stated value and a first-day price below the offer point to investors demanding a high return for the risk, and that cost compounds every year the preferred is outstanding.
A third reading is that the proceeds are optional. The filing allows uses other than bitcoin, so the raise may not translate directly into buying.
What to watch
Any disclosure of bitcoin purchases by Strive; SATS trading relative to $90 over the next week; the first dividend declaration ahead of Nov. 9; preferred offerings by other treasury companies, including Strategy; and bitcoin's price relative to the cost of the dividend. A sustained discount to the offer price would make the next raise harder for the whole group.