Strive Stock Jumps 20% on $630M Bitcoin Bet: But Is It a Buy?

Strive (ASST) stock surged 20.5% this week after the company completed a $630 million preferred stock offering. The offering consisted of 7 million shares of 15% Series A Perpetual SATS Preferred Stock at $90 per share, closed on Tuesday. The proceeds will fund general corporate purposes and additional Bitcoin purchases.

The company also disclosed that it bought 4,045 Bitcoins between Oct. 12 and Oct. 16 at an average price of $82,803 per coin. This raised its total treasury holdings to 36,818 Bitcoins, worth roughly $3 billion at current prices.

Strive operates as a Bitcoin treasury company, raising capital through stock offerings to buy and hold Bitcoin as its core reserve asset. By issuing perpetual preferred stock with fixed dividend yields, management aims to amplify per-share Bitcoin exposure for common equity holders without diluting ownership through direct sales of common stock.

However, funding asset purchases with fixed-yield preferred obligations adds leverage to the capital structure, leaving common shareholders exposed if coin prices drop. This week's upsized preferred offering resolves near-term funding questions by providing more cash to accelerate Strive's Bitcoin accumulation strategy.

The stock's jump reflects investor enthusiasm for Strive's aggressive Bitcoin accumulation strategy. The $630 million preferred offering provides ample capital to buy more Bitcoin, which could further boost the company's treasury and potentially its stock price if Bitcoin prices rise.

However, the use of preferred stock with a 15% dividend yield introduces significant leverage. Strive must pay these dividends regularly, which could strain liquidity if Bitcoin prices fall and the company's cash flow doesn't cover obligations. This risk is particularly acute given the daily dividend schedule starting Nov. 9.

Moreover, Strive's stock is currently valued at about 1.4 times its Bitcoin and other treasury assets, meaning investors are paying a 40% premium to the underlying value. Historically, treasury companies trade closer to net asset value (NAV), and when premiums are high, direct Bitcoin ownership or a Bitcoin ETF may be more cost-effective.

Investors should watch the upcoming earnings report in November and the start of daily SATS dividends on Nov. 9. The company's reliance on high-yield preferred equity to purchase non-yielding digital assets remains a key risk for common shareholders if Bitcoin experiences a deep downturn.