Strive’s 16.7% SATS Yield Has Investor Risks

Strive priced 7 million SATS preferred shares at $90 each on Oct. 15. The $15 annual dividend implies a 16.7% cash yield for investors who buy at the offering price.

The offering is expected to raise $630 million before expenses, with settlement scheduled for Oct. 20. Strive plans to use the proceeds to buy Bitcoin, support its business, acquire income-generating assets or repurchase other shares.

Each SATS share has a $100 stated amount and an initial $100 liquidation preference. Adjustments cannot reduce the preference below $100. The preference determines the claim used in specified liquidation events; it does not give holders an automatic right to sell the shares to Strive for $100.

SATS has no maturity date, so the company has no scheduled date to return investors’ original purchase price. The market price will depend on demand for the dividend and the risks tied to Strive’s finances.

A share bought for $90 could trade above $100 if buyers accept a lower yield. It could fall to $75 even if Strive makes every scheduled dividend payment. At $75, the $15 dividend would equal a 20% cash yield. At $90, it would equal 16.7%, while a $100 price would produce a 15% yield. These figures exclude price changes, fees and taxes.

An investor who pays $90, receives $15 in dividends over a year and sells the share for $75 would receive $90 in total before costs. If all payments were made on time, the investor would have earned no return. A further decline in the resale price could exceed the dividend income.

SATS ranks ahead of Strive’s common shares for dividends and liquidation distributions, but behind the company’s existing SATA preferred stock. Debt and certain obligations at Strive subsidiaries also rank ahead of SATS. Strive may issue additional securities with the same or higher priority.

Preferred shareholders can receive payments before common shareholders when a company’s assets decline, but their claims are paid only after higher-ranking obligations are met. Additional securities can increase Strive’s Bitcoin holdings while adding claims against the company.

Strive’s October Bitcoin purchases increased its gross Bitcoin holdings per effective common share by 1.72%, according to the offering materials. An increase in total Bitcoin holdings therefore does not produce the same increase in the assets supporting each investor’s claim.

SATS dividends are scheduled to begin on Nov. 9 and to be paid every business day. At 7 million shares, the $15 annual rate would require about $105 million in dividends each year if paid in full.

Strive plans to establish a reserve of $22.50 per share at closing, or $157.5 million in total. The reserve represents 18 months of scheduled dividends. The prospectus identifies additional capital raising as a primary source of dividend funding after that period.

Bitcoin does not generate regular cash income for Strive. The company could fund dividends through new financing, asset sales, investment income or other sources. New financing would add obligations, while asset sales could reduce its Bitcoin holdings or other assets.

SATS holders have a repurchase right after a defined fundamental change, generally at the $100 stated amount plus accumulated unpaid dividends. Strive has limited redemption rights under specified conditions. Neither provision gives investors a normal daily right to sell the shares for $100.