A conversion price 300% higher than the $160 stock price, Strive's 'perpetual preferred stock' strategy solves Michael Saylor's debt dilemma

Strive, the operator of the Bitcoin vault, has introduced a new debt restructuring model utilizing perpetual preferred stock to the market. On January 22, Strive expanded its follow-up offering of variable-rate preferred stock (SATA) from the initially expected $150 million to over $225 million, pricing it at $90 per share. This transaction structure presents a new blueprint by replacing maturing fixed-term debt with perpetual preferred stock, fundamentally eliminating the problem of refinancing risk.

Replacing Maturity Debt with Perpetual Preferred Stock… Eliminating Refinance Risk at the Source

The approach chosen by Strive is entirely different from traditional debt structures. Instead of converting maturing debt into common stock or refinancing through new borrowings, it reorganizes into permanent capital via perpetual preferred stock. SATA preferred stock currently pays a 12.25% variable dividend, with no maturity or conversion provisions. Since preferred stock is recognized as equity rather than debt, it improves the company’s leverage ratios on the books and significantly enhances financial flexibility.

From the creditors’ perspective, this deal is also attractive. Instead of holding existing convertible bonds, they receive perpetual, highly liquid preferred stock with senior rights over common shares. Most importantly, they can continue to earn higher yields without the uncertainty of stock conversion.

A $300 Million Transaction Structure Seen Through Strive’s Example

On January 24, Strive agreed to exchange some of its convertible senior bonds (4.25%, maturing in 2030), guaranteed by Semler Scientific, for this preferred stock. Approximately $90 million of bonds will be directly exchanged, equivalent to about 930,000 newly issued SATA shares.

The remaining proceeds from the offering are planned to be used for various purposes. Some will be used to repurchase or repay the remaining balance of Semler bonds, and some will be allocated to repay credit facility borrowings. The rest will be invested in additional Bitcoin purchases. This strategy goes beyond simple debt restructuring, simultaneously expanding Bitcoin assets.

Can Strategy, Holding Over $8.3 Billion in Unpaid Debt, Follow the Same Path?

Michael Saylor’s Strategy (MicroStrategy, MSTR) currently holds about $8.3 billion in unpaid convertible bonds. The largest portion is a $3 billion tranche maturing in June 2028, with a conversion price set at $672.40 per share. Considering that Strategy’s stock is trading in the $160 range, the current share price is roughly 300% below the conversion price.

Recently, the value of Strategy’s perpetual preferred stock has surpassed the nominal value of its convertible bonds, leading to the view that the perpetual preferred stock model proposed by Strive could be a practical solution for Saylor’s debt issues. Although there is still time until June 2028, this structural overhaul is seen as a potential additional measure to address future maturity risks.

Why the Market Is Paying Attention: Improving Capital Structure and Reported Leverage

The reason this perpetual preferred stock model is attracting attention is multi-layered. First, it improves the company’s book capital structure. Converting debt into equity lowers the debt ratio and resets borrowing limits, enabling additional fundraising. Second, it completely eliminates market interest rate risk associated with refinancing timing. Since perpetual preferred stock has no maturity, periodic refinancing becomes unnecessary.

Third, dividends can be treated as expenses, offering tax advantages. This means preferred stock dividends can receive more flexible tax treatment compared to traditional interest payments. Fourth, investor confidence can also be enhanced. Eliminating refinancing risk can lead to higher credit ratings, potentially lowering future borrowing costs.

Industry watchers are keen to see whether Strive’s recent transaction could establish a new standard for debt restructuring among Bitcoin asset-holding companies.