Bitcoin treasury company Strive closed a $630 million preferred stock offering on October 20, adding a fixed-rate security to its financing program. The company sold seven million SATS shares at $90 each, after increasing the planned sale by 40%.
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The 15% Series A Perpetual Preferred Stock is likely to list on the Nasdaq Global Market with a stock symbol of SATS sometime next week. The $630 million amount constitutes the gross proceeds before deducting the underwriting fees, commissions, and other charges.
Initially, Strive indicated plans to issue five million shares on October 13. Pricing was announced two days later on October 15, followed by the completion of the issuance process five days later.
Chairman and CEO Matt Cole called the transaction a critical milestone in the company’s strategy for common shareholders. He said the new security would expand funding options and support the credit profile of its existing SATA preferred shares.
How Does the SATS Dividend Work?
SATS has offered an annual fixed dividend of 15% with a stated value of $100 per share. It means that $15 would be paid for every share annually, if all dividends are distributed.
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The investors who bought the issue have paid $90 per share and not $100. This way, at the current price, the annual $15 dividend would give them a 16.67% annual yield if the payment is completed in full.
The 15% is the fixed dividend rate against stated value and not the market price of the security. For the people buying the stock in the secondary market, the yield would be different depending on price changes.
Strive intends to start paying dividends daily starting from November 9. For that, the board approval and presence of legally available funds are required. The dividends that are not paid would accrue according to the terms of the security.
According to a preliminary prospectus, it was planned to reserve $22.50 per SATS share out of cash and securities. This means reserving $157.5 million out of seven million shares for 18 months of dividends. However, there was no information in the closing announcement about this sum.
Why Did Strive Introduce SATS Alongside SATA?
The firm currently provides two types of preferred stocks with different dividend policies. For instance, SATS has a fixed policy geared towards income stability, while SATA has a variable one, but it is handled through price stability.
Cole noted that the subordinated capital by SATS would help in enhancing the company’s standing within the capital structure. Besides, he also pointed out the relevance of the switch in relation to the amplification ratio, which Strive uses to boost shareholder return compared to Bitcoin.
Strive has made use of SATA in raising money for purchasing Bitcoin. In September, it purchased 469 BTC worth $36.6 million, increasing its holdings to 25,000 BTC.
BitcoinTreasuries.net later calculated that SATA had generated $85.88 million during three trading days in September. However, this does not indicate that all the money had been used in the purchase of Bitcoins.
Strive has recently adjusted SATA’s payment schedule. For example, it instituted business day dividends in June.
How Will the Offering Proceeds Be Used?
The October 15 SEC filing by Strive indicated that Bitcoin and other similar investments were among the uses of proceeds. Working capital, income-generating assets, capital expenditures, acquisitions, and common or SATA preferred stock buybacks were also included in the list.
Since the October 20 closing announcement did not include an allocation of spending plans, the completion of the stock offering does not confirm the amount spent on new Bitcoin purchases.
Jeff Walton, the Chief Risk Officer, stated that the Bitcoin Balance Sheet provides the preferred investors with insight into the underlying assets behind the dividend payment obligation. He also pointed out that Strive was debt-free and had no maturities, and its primary focus was on its dividend payment.
Ben Werkman, the Chief Investment Officer, described SATS as a fixed-rate perpetual instrument for the investors having diverse income requirements compared to SATA investors. The transaction was made using the Strive’s Form S-3 registration statement with the supplement to the prospectus and the accompanying prospectus.
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This article contains market analysis and price predictions. These are not guarantees. Crypto markets are volatile. Always DYOR. Not financial advice.
