425: Strive Acquires Semler Scientific in All-Equity Bitcoin Deal

Strive's CRO discusses the rapid, all-equity acquisition of Semler Scientific, emphasizing Bitcoin-centric valuation and future plans for perpetual preferred securities.

Summary

• Strive, Inc. has acquired Semler Scientific, Inc. in an all-equity, cashless M&A transaction, which was executed rapidly following initial conversations at a Bitcoin Treasuries Conference.
• The acquisition was approached with a 'Bitcoin lens,' focusing on Bitcoin yield, Bitcoin per share, and synergies, rather than a traditional fiat valuation.
• Semler Scientific was trading at 0.8 MNAV (Market Value to Net Asset Value) prior to the transaction.
• Strive aims to monetize its equity as currency and leverage the acquisition to grow its balance sheet for offering Bitcoin-backed securities.
• The deal is seen as a potential case study for future M&A, signaling that Bitcoin treasury companies should trade at a premium due to the inefficiency of acquiring Bitcoin at scale on the open market.
• Strive intends to issue a perpetual preferred security in 2025, aiming to be the second company in the market with such an instrument, and is exploring various Bitcoin yield generation strategies.
• The acquired healthcare business of Semler Scientific is viewed as a unique synergy opportunity, potentially to be spun off, with Strive's largest shareholder, Vivek Ramaswamy, having relevant expertise.
• Strive's operating asset management business, with $2-2.5 billion in assets under management, provides regulatory compliance (40s Act) and acts as 'spies in the market,' despite currently being a 'little bit of a drag' as a growth company.

Sentiment

Score: 8

Explanation: The filing conveys strong confidence in Strive's strategic direction, particularly its innovative M&A approach for Bitcoin acquisition and its plans for Bitcoin-backed perpetual preferred securities. The management team's expertise and the rapid execution of the Semler acquisition contribute to a highly positive outlook, despite acknowledging the healthcare business as a potential drag and general market risks.

Positives

• The acquisition of Semler Scientific was an all-equity, cashless transaction, preserving Strive's cash reserves.
• The M&A strategy is presented as a highly efficient way to acquire Bitcoin at scale, potentially at a premium to market price, without causing significant price movement.
• The transaction was executed with remarkable speed, demonstrating Strive's agility and decisiveness.
• Strive's valuation approach, using a 'Bitcoin lens,' is innovative and positions the company as a leader in Bitcoin-centric M&A.
• Significant strategic synergies are anticipated, particularly leveraging Semler's healthcare business with the expertise of Strive's largest shareholder, Vivek Ramaswamy, for potential spin-off.
• Strive boasts a strong and experienced management team, including CEO Matt Cole (managed a $70 billion bond fund at CalPERS) and CFO Ben Pham (M&A experience from Roivant).
• The company plans to issue a perpetual preferred security in 2025, which would be senior in its capital stack, offering a novel and powerful capital raising mechanism.
• Strive's operating asset management business provides regulatory advantages and built-in distribution channels, with a team that speaks a common financial language.

Negatives

• The healthcare business acquired from Semler Scientific is not expected to beat the Bitcoin hurdle rate, suggesting it may not be a core long-term asset for Strive.
• Strive's operating asset management business is currently described as 'a little bit of a drag' due to its growth company status, though this is not expected to continue into the future.

Risks

• The occurrence of any event, change, or other circumstances that could give rise to the right of one or both parties to terminate the merger agreement.
• The possibility that the proposed transaction does not close when expected or at all because conditions to closing are not received or satisfied on a timely basis or at all.
• The outcome of any legal proceedings that may be instituted against Strive or Semler Scientific or the combined company.
• The possibility that the anticipated benefits of the proposed transaction, including cost savings and strategic gains, are not realized when expected or at all.
• Risks associated with Bitcoin and other digital assets, general economic and market conditions, interest and exchange rates, monetary policy, and laws and regulations and their enforcement.
• The possibility that the integration of the two companies may be more difficult, time-consuming, or costly than expected.
• The possibility that the proposed transaction may be more expensive or take longer to complete than anticipated due to unexpected factors or events.
• Diversion of management's attention from ongoing business operations and opportunities.
• Dilution caused by Strive's issuance of additional shares of its Class A common stock in connection with the proposed transaction.
• Potential adverse reactions of Strive's or Semler Scientific's customers or changes to business or employee relationships resulting from the announcement or completion of the proposed transaction.
• Changes in Strive's or Semler Scientific's share price before closing.
• Other unknown or unpredictable factors that could harm Strive, Semler Scientific, or the combined company's results.

Future Outlook

Strive aims to issue perpetual preferred securities in 2025, positioning itself as a high-growth 'Lamborghini' among Bitcoin treasury companies with amplified Bitcoin equity. The company plans to explore various Bitcoin yield generation strategies, including derivatives, downside protection, insurance, collateralized markets, and lending. There is potential to spin off Semler Scientific's healthcare business and pursue future M&A opportunities in altcoin digital asset treasuries, provided they convert their assets to Bitcoin.

Management Comments

• "This will be a case study for M&A for the coming decades because it was more focused on Bitcoin yield, or Bitcoin per share and synergies."
• "We really do view Bitcoin as the hurdle rate and don't necessarily think that the healthcare business will beat the Bitcoin hurdle rate, but that doesn't mean that there isn't opportunity to shine this thing up, clean it up a little bit, and put it out into the market."
• "We're effectively monetizing our equity as currency, right? This was an all equity transaction. So it's paper for paper transaction. No cash was used."
• "These companies should trade at a premium."
• "What we're trying to build here is very similar to effectively what MetaPlanet has built in Japan. We are trying to build the growth story with two things. We want amplified Bitcoin equity, and we have intentions to issue perpetual preferred security. So we want the best form of long tail leverage where we do not have to pay back the maturity and we want an amplified Bitcoin exposure in a high growth format. We want to be like the Lamborghini of the Bitcoin treasury companies."
• "All eyes are focused on getting the perpetual preferred out into the market."
• "The operating business is, for us, you could think of almost like spies in the market."
• "The altcoin digital asset treasuries are going to get hit harder than Bitcoin treasuries. And that could be a unique acquisition opportunity for the Bitcoin marketplace as a whole to look at those altcoin treasuries and offer them an exit ramp if and only if they convert their assets to Bitcoin."

Industry Context

The filing highlights a growing trend of companies adopting Bitcoin treasury strategies, moving beyond simple holding to active management and leveraging Bitcoin for capital raises. It positions Strive as a key player in this evolving space, drawing comparisons to MicroStrategy ('Strategy') and MetaPlanet, and suggesting a new M&A model for Bitcoin acquisition. The discussion of perpetual preferred securities indicates a maturing market for Bitcoin-backed financial instruments, with Strive aiming to be a pioneer in this area.

Comparison to Industry Standards

• Strive aims to be the second company in the market to issue a perpetual preferred security, following MicroStrategy (referred to as 'Strategy').
• Strive's perpetual preferred security would be senior in its capital stack, unlike MicroStrategy's, which has $8 billion of convertible debt sitting above its perpetual preferred.
• Strive's valuation approach for M&A, using a 'Bitcoin lens' focused on Bitcoin yield and Bitcoin per share, is presented as a novel 'case study for M&A for the coming decades,' differentiating it from traditional fiat-based M&A.
• Strive's strategy of using its operating business (asset management with $2-2.5 billion AUM) for 40s Act compliance and as 'spies in the market' is a unique approach compared to other Bitcoin treasury companies.
• The company explicitly differentiates itself from GBTC, stating that Bitcoin treasury companies are operating entities with balance sheets that can leverage Bitcoin in various ways, unlike a trust.
• Strive's exploration of 'volatility enhancing transactions' in derivatives differs from MetaPlanet's strategy of 'volatility dampening transactions' (e.g., put options).

Stakeholder Impact

• Shareholders: Potential for amplified Bitcoin equity, high growth, and increased share value through strategic M&A and capital raises. Dilution risk from stock issuance in the Semler transaction.
• Employees: Integration of teams from acquired companies, leveraging expertise (e.g., Semler's healthcare team, Strive's asset management team).
• Customers (of Strive's ETFs): Continued offering of ETFs, potential for new Bitcoin-backed products.
• Creditors (future): Opportunity to invest in novel Bitcoin-backed perpetual preferred securities with a senior position in Strive's capital stack.

Next Steps

• Develop and issue a perpetual preferred security in 2025.
• Explore derivatives, downside protection, insurance, collateralized markets, and lending for Bitcoin yield generation.
• Potentially spin off Semler Scientific's healthcare business.
• Identify and pursue M&A opportunities in altcoin digital asset treasuries that convert to Bitcoin.
• File a Registration Statement on Form S-4, Information Statement/Proxy Statement/Prospectus, and other relevant documents with the SEC.

Key Dates

Recommendation

The acquisition of Semler Scientific at a discount, executed as an all-equity transaction, demonstrates Strive's innovative and efficient strategy for accumulating Bitcoin. The company's clear vision to become a leading Bitcoin treasury firm, akin to a 'Lamborghini' in the space, through amplified Bitcoin equity and the planned issuance of perpetual preferred securities, signals significant growth potential. The strong, experienced management team, with backgrounds in large-scale asset management and M&A, provides confidence in their ability to execute this strategy. Furthermore, the proactive approach to identifying future M&A targets in the altcoin treasury space, contingent on Bitcoin conversion, positions Strive for continued strategic expansion. These factors collectively suggest a compelling investment opportunity.

Keywords

Strive, Semler Scientific, Bitcoin, M&A, Perpetual Preferred Security, Digital Assets, Financial Reporting, Corporate Governance, Risk Management, Strategic Analysis, Healthcare, Asset Management, SEC Filing, Form 425