Strive has bought more bitcoin. As of Tuesday, the company had added 2,822 bitcoin for about $235 million, bringing its total holdings to 35,595. Judging by the amount and quantity alone, this was just a routine treasury purchase. But one figure in the same disclosure is easier to overlook: 94% of its traditional warrants have now been exercised.
This time, the company exercised about 13.7 million of the 15.3 million warrants that remained, and expects to receive gross proceeds of $369 million. In other words, a large share of the money for this round of purchases came from warrant exercises, not new funds raised from the market. When warrants are exercised, shareholders pay the company an agreed-upon price, and the company uses the money to buy bitcoin.
The disclosure gives a leverage ratio of 47%. This figure describes how much financing instruments amplify shareholders’ capital. Warrants, convertible bonds, and preferred shares are layered on top of one another, amplifying the amount of bitcoin represented by each share when prices rise. When the price of bitcoin rises, the amount of bitcoin per share increases faster than the price itself—that is the source of treasury companies’ efficiency in a bull market.
But the same structure works in reverse. The higher the leverage ratio, the deeper the drop in net asset value per share when the price of bitcoin falls. A 47% leverage ratio looks good on the way up, but the story changes on the way down. Leverage doesn’t pick a direction.
With 94% of the warrants already exercised, the available financing tools are nearly exhausted. Next, the company will either have to rely on further share-price gains to raise more capital, or slow its purchases. The blockchain shows how much it has bought, but not how much money it has left.
This time, the company exercised about 13.7 million of the 15.3 million warrants that remained, and expects to receive gross proceeds of $369 million. In other words, a large share of the money for this round of purchases came from warrant exercises, not new funds raised from the market. When warrants are exercised, shareholders pay the company an agreed-upon price, and the company uses the money to buy bitcoin.
The disclosure gives a leverage ratio of 47%. This figure describes how much financing instruments amplify shareholders’ capital. Warrants, convertible bonds, and preferred shares are layered on top of one another, amplifying the amount of bitcoin represented by each share when prices rise. When the price of bitcoin rises, the amount of bitcoin per share increases faster than the price itself—that is the source of treasury companies’ efficiency in a bull market.
But the same structure works in reverse. The higher the leverage ratio, the deeper the drop in net asset value per share when the price of bitcoin falls. A 47% leverage ratio looks good on the way up, but the story changes on the way down. Leverage doesn’t pick a direction.
With 94% of the warrants already exercised, the available financing tools are nearly exhausted. Next, the company will either have to rely on further share-price gains to raise more capital, or slow its purchases. The blockchain shows how much it has bought, but not how much money it has left.