Bitplanet Warns Strive’s SATS Perpetual Preferred May Heighten Financial Risk on 15% Fixed Dividend

Bitplanet Research Lab said the fixed-dividend structure of SATS, the perpetual preferred stock issued by Bitcoin treasury company Strive, could increase the company’s long-term financial burden.

In a report published on Oct. 21 titled “Strive’s SATS Perpetual Preferred Issuance and the Pitfalls of a Fixed Dividend Structure,” Bitplanet laid out that view.

Strive on Oct. 15 set the SATS public offering at 7 million shares at $90 apiece, for a total of $630 million. SATS offers a fixed annual dividend rate of 15% based on a $100 par value per share. Based on the actual offering price, the annual cash dividend yield works out to about 16.67%.

Bitplanet said Strive is trying to attract investors who prefer fixed dividends while using the proceeds to buy Bitcoin and maximize returns for common shareholders. Even if Bitcoin rises and generates unrealized gains, however, the company would still need separate cash to pay dividends.

Bitplanet identified Strive’s reliance on external financing as a key risk factor. According to the report, Strive posted a net cash outflow of about $39.4 million from operating activities in the first half of this year. By contrast, financing activities, including the issuance of stock and other securities, generated a net cash inflow of about $702.74 million. In other words, the company has been securing cash through outside fundraising rather than its own operations.

Strive is not currently generating enough cash from operations alone to cover dividends and new investments, the report said. If external fundraising becomes more difficult, the company may have to sell holdings such as Bitcoin to maintain the dividend.

Bitplanet also warned of risks tied to a decline in Bitcoin prices. If the terms of the existing floating-dividend preferred SATA and SATS remain unchanged, Strive’s annual preferred dividend burden would reach about $287.4 million. Assuming the entire amount were funded through Bitcoin sales, the company would need to sell about 3,484 Bitcoin at a price of $82,500, or about 6,967 Bitcoin if the price fell to $41,250.

If Bitcoin’s price is cut in half, the amount the company would need to sell to pay the same dividend would double. Selling core assets to maintain the dividend could also reduce its ability to benefit from any future rise in Bitcoin prices.

Bitplanet added that when assessing the appeal of perpetual preferred stock, what matters more than the offering size is whether the issuer can secure actual funding for dividends. It said investors should look comprehensively at operating cash flow, the scale of new capital raising and trends in net Bitcoin sales.