Strive has recently announced that it will utilize one-third of its corporate cash reserves to purchase income-generating instruments issued by Strategy, the world's largest Bitcoin holder. At the same time, Strive has also increased the dividends on its Bitcoin-linked preferred shares.
Transaction Details and Rationale
Strive has invested $50 million to acquire 500,000 shares of Strategy's floating-rate Series A perpetual preferred stock (ticker: STRC), which pays cash dividends monthly with an annualized yield of up to 11.5%. Strive's CEO, Matt Cole, stated that the funds come from cash previously sitting in low-yield money market funds. By moving $50 million from a money market fund yielding about 4% to STRC, Strive can generate an additional approximately $3.75 million in income annually on the same capital.
The second purpose of this purchase is structural. Holding STRC extends Strive's dividend reserves for its own SATA preferred shares to 18 months, which includes 12 months of cash and cash equivalents reserves, along with a 6-month reserve supported by the STRC position. This extension of the reserve period allows Strive to increase the SATA dividend rate from its previous level to 12.75% annually while purchasing STRC. Without the buffer provided by STRC, this move would be financially riskier.
The logic is carefully designed: Strive buys STRC at an 11.5% yield and then uses that income to pay a 12.75% dividend on SATA. On paper, the income Strive receives from STRC is less than the dividends it pays on SATA, but Strive expects that an increase in Bitcoin prices during the same period will bridge this gap. This structure only works when Bitcoin prices rise. Strive's entire business model bets on the appreciation of Bitcoin prices.
Market Performance of STRC
Strategy's STRC set a record with a single-day trading volume of $409 million on March 10. Its 30-day volatility has dropped to a historical low of 3%, which is a very stable level for a preferred stock associated with a company whose primary asset is Bitcoin. The high yield, monthly cash payments, and recent lower volatility have attracted institutional buyers beyond Strive. Anchorage Digital, Prevalon Energy, and OranjeBTC have all included STRC in their corporate fund management allocations.
Institutional investors are treating Strategy's preferred stock instruments as assets for fund management, representing a second-order effect of the Bitcoin fund management company model. Strategy issues preferred shares to fund Bitcoin purchases, while other companies buy these preferred shares as income-generating fund management tools. The raised funds are used to purchase more Bitcoin. An increase in Bitcoin prices raises the collateral value supporting the preferred shares. As long as Bitcoin prices remain stable or increase, this cycle will continue.
Strive's Current Balance Sheet
After completing the STRC purchase, Strive holds 13,311 Bitcoins, valued at approximately $930 million, along with $143.4 million in cash and cash equivalents prior to deploying the $50 million.