Strive’s SATA program reportedly generated around $55 million this week, enough to buy nearly 638 bitcoins. But this financing capacity depends directly on the price of the preferred share. As of Wednesday, the stock fell below $100, preventing the company from continuing its issues. A limit which recalls the risks of the model inspired by Strategy.
In brief
- The SATA program would have brought in $55 million, or the equivalent of 638 bitcoins, according to trackers.
- The stock closed below its par value of $100 for three out of five sessions, slowing new issues.
- As of October 2, Strive held 29,462 bitcoins, according to its latest official filing, which also reports an additional 1,304,902 preferred shares.
Financing at a standstill below 100 dollars
The mechanism is based on simple logic. Strive, which held 27,462 bitcoins at the end of September, is gradually selling SATA preferred shares under an “at-the-market” (ATM) program. The company then uses the funds raised to strengthen its bitcoin reserve.
However, this system imposes a condition: the security must remain above its nominal value of 100 dollars. However, this week, SATA only exceeded this threshold on Monday and Tuesday. From Wednesday, the price fell back below, thus cutting off the main source of financing for purchases.
According to trackers, Strive would still have collected around $55 million over the week, enough to acquire nearly 638 bitcoins. This estimate is based on trading above par and a ratio calculated from previous company disclosures. With bitcoin around $82,800 on Friday, this amount corresponds well to the order of magnitude announced.
Strive gets ahead of Strategy
Michael Saylor popularized this strategy at Strategy with STRC, his floating-rate perpetual preferred stock. Strive uses the same principle with SATA, but on a smaller scale.
In his October 5 filing with the SECStrive says it issued an additional 1,304,902 preferred shares between September 25 and October 2. Their nominal value thus exceeds 130 million dollars.
Over the same period, Strategy did not sell any STRC shares and financed the purchase of 334 bitcoins with common stock, bringing its reserve to 848,000 units. However, Saylor sees Strive as an ally rather than a competitor.
Dividends to be financed over time
This strategy, however, comes with a cost. Each SATA issue provides funds immediately, but also increases the dividends that Strive will have to pay in the future. As of September 30, the company estimated its annualized obligations at $168.2 million, for $1.294 billion of securities issued at par.
Furthermore, its portfolio remains exposed to variations in bitcoin. As of September 30, Strive held 28,000 BTC purchased at an average price of $90,170, while their market value reached approximately $2.34 billion. Bitcoin then moved below this acquisition cost. The 2,000 bitcoins purchased the following week were purchased at approximately $84,422 each.
We will therefore have to wait for the next official filing to know the exact results for the week. In the meantime, the 638 bitcoins remain an estimate. One thing is certain: Strive’s model works as long as investors agree to buy SATA above its face value.
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