425: Strive Acquires Semler Scientific in Bitcoin-Backed Deal

Strive, Inc. announced the acquisition of Semler Scientific, leveraging Bitcoin treasury strategies to create a new financial structure and drive future growth.

Summary

• Strive, Inc. (Strive) is acquiring Semler Scientific, Inc. (Semler), with each share of Semler Scientific receiving 21.05 shares of Strive Class A common stock.
• The transaction is described as an "institutionally complex" and "accretive transaction" for Strive in terms of Bitcoin per share.
• The deal implies a significant premium for Semler shareholders, with an offer value around $90 per Semler share compared to its Friday closing price of $28, representing a 200% premium.
• Jeff Walton, a Strive board member, highlighted Bitcoin on Semler's balance sheet as a key factor enabling the acquisition and providing "buoyancy in rough times."
• Strive intends to explore opportunities to spin off Semler's healthcare business, potentially with assistance from Vivek Ramaswamy, a large Strive shareholder.
• Strive plans to issue perpetual preferred equity in 2025, with the acquisition expected to improve its credit quality and overall entity profile.
• The cost to borrow Strive's stock (ASST) is 600% annually, indicating significant short interest and market dynamics.
• The transaction is viewed as a "proof concept" for new financial structures enabled by Bitcoin, suggesting future innovation in the space.
• Discussions also covered the growing Bitcoin derivatives markets, concerns about Bitcoin liquidity for lending, and the broader implications of Bitcoin's adoption in traditional finance, which is considered to be in "phase one."

Sentiment

Score: 8

Explanation: The filing conveys a highly optimistic and innovative sentiment regarding the acquisition and the future of Bitcoin in corporate finance. The deal is described as accretive, a 'proof concept,' and a significant opportunity for both companies and the broader industry. While risks are acknowledged, the overall tone is bullish on the strategic direction and potential for growth.

Positives

• The acquisition of Semler Scientific is mathematically accretive to Strive in terms of Bitcoin per share.
• Semler shareholders are receiving a substantial premium, with the offer valuing their shares around $90 compared to the previous Friday's $28 close, representing a 200% premium.
• The transaction serves as a "proof concept" for new financial structures enabled by Bitcoin, suggesting future innovation and M&A opportunities.
• Strive plans to issue perpetual preferred equity in 2025, with the acquisition expected to improve its credit quality and overall entity profile.
• The deal leverages Semler's existing Bitcoin treasury strategy, demonstrating how Bitcoin can provide "buoyancy in rough times" for companies.
• Strive intends to spin off Semler's healthcare business, potentially monetizing it with the help of large shareholder Vivek Ramaswamy.
• The transaction is viewed as a positive signal for other companies, particularly biotechs or healthcare firms, to consider Bitcoin on their balance sheets.
• The speakers express bullish sentiment on Bitcoin adoption, believing it is still in "phase one" with significant future growth potential.

Negatives

• The cost to borrow Strive's stock (ASST) is extremely high at 600% annually, indicating significant short interest and potential market volatility.
• The transaction is described as "institutionally complex" and "super tricky," requiring extensive due diligence and potentially leading to unforeseen challenges.
• Concerns were raised about the efficiency of market pricing for Strive (ASST) and Semler (SMLR) shares post-announcement, with a large arbitrage gap noted.
• The initial speaker raised concerns about the segregation of Bitcoin holdings by custodians, suggesting potential large losses in case of custodian bankruptcy, though Jeff Walton clarified that for MicroStrategy, a majority is in true cold storage.
• Concerns were expressed about the liquidity of Bitcoin available for lending to support the growing derivatives market, suggesting "something weird is going on."
• The integration of the two companies may be more difficult, time-consuming, or costly than expected.
• The proposed transaction may be more expensive or take longer to complete than anticipated due to unexpected factors or events.
• Management's attention may be diverted 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 from Strive's or Semler Scientific's customers or changes to business or employee relationships, including those resulting from the announcement or completion of the proposed transaction.
• Changes in Strive's or Semler Scientific's share price before closing could impact the deal's perceived value.

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 the 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 anticipated cost savings and strategic gains, are not realized when expected or at all, including as a result of changes in, or problems arising from, implementation of Bitcoin treasury strategies and 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 could negatively impact the combined entity.
• 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, including as a result of unexpected factors or events.
• The 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, including those resulting from the announcement or completion of the proposed transaction.
• Changes in Strive's or Semler Scientific's share price before closing.
• Risks associated with Bitcoin and other digital assets, including the potential for social engineering attacks and the human element of having somebody control coins at an exchange.
• The inherent volatility of the Bitcoin market and the broader financial system, which could lead to significant price fluctuations.

Future Outlook

Strive intends to issue perpetual preferred equity in 2025, leveraging the improved credit quality from the Semler acquisition. The company also plans to explore spinning off Semler's healthcare business. Management views the transaction as a "proof concept" for future M&A activity and new financial structures enabled by Bitcoin, anticipating continued growth and innovation in the Bitcoin-backed finance space.

Management Comments

• Jeff Walton: "This is an institutionally complex transaction... mathematically, is a creative transaction to Strive, and there are several dynamics at play."
• Jeff Walton: "A majority of this [MicroStrategy's Bitcoin] is in true, true cold storage." (Clarifying a point about MicroStrategy's Bitcoin custody, relevant to the broader discussion).
• Jeff Walton: "We really view Bitcoin as a hurdle rate, and that's kind of our that is our North Star."
• Jeff Walton: "There are 498 slots open in the S&P 500 to hold Bitcoin on your balance sheet. And we're, we're gunning for one of those."
• Jeff Walton: "This is just the beginning, and a lot of excitement about the future. So we're getting creative, we're using a lot of math, and we're really putting our banker colleagues and our lawyer colleagues to the test."
• Jeff Walton: "We're so early in the adoption curve, it's hard not to be bullish on this stuff."

Industry Context

The acquisition highlights a growing trend of companies leveraging Bitcoin as a treasury asset and integrating it into their strategic financial planning. This move by Strive and Semler Scientific is presented as a case study for how Bitcoin can enable new M&A structures and provide financial buoyancy, particularly for companies seeking alternative growth paths. The discussion also touches on the broader, complex and volatile landscape of Bitcoin derivatives markets and the ongoing debate about the coexistence of fiat and Bitcoin systems, suggesting a 'phase one' of Bitcoin adoption in traditional finance.

Comparison to Industry Standards

• The deal structure, involving a significant premium and warrants, is compared to Warren Buffett's investment in Goldman Sachs in 2008-2009, which included 100% equal warrants.
• The discussion on Bitcoin custody and shorting MicroStrategy (MSTR) is a direct comparison to a leading public company with a significant Bitcoin treasury strategy.
• The concept of 498 S&P 500 companies potentially holding Bitcoin on their balance sheets sets a benchmark for future corporate adoption.
• The high cost to borrow Strive's stock (600% annually) is an extreme outlier compared to typical equity borrowing costs, indicating unique market dynamics and potential arbitrage opportunities.

Management Changes

Corporate Governance

Legal Proceedings

• The filing mentions the possibility that legal proceedings may be instituted against Strive, Semler Scientific, or the combined company related to the proposed transaction.

Related Party Transactions

• Information about Semler Scientific's transactions with related persons is referenced in its definitive proxy statement for its 2025 Annual Meeting of Stockholders.
• Information about Strive's directors and executive officers' ownership of Strive securities and their SEC filings is referenced.

Stakeholder Impact

• Shareholders (Semler Scientific): Expected to receive a significant premium (200%) and shares in the combined entity, potentially benefiting from Strive's Bitcoin strategy and future growth.
• Shareholders (Strive): The transaction is mathematically accretive in terms of Bitcoin per share, but dilution from new share issuance is a risk. The high cost to borrow ASST indicates significant short interest.
• Employees (Semler Scientific & Strive): Potential changes to business or employee relationships due to the merger and integration process.
• Customers (Semler Scientific & Strive): Potential adverse reactions or changes to relationships resulting from the announcement or completion of the proposed transaction.
• Creditors: Improved credit quality for Strive due to the acquisition could be beneficial, especially in anticipation of perpetual preferred equity issuance.

Next Steps

• Strive intends to file a Registration Statement on Form S-4 with the SEC to register Class A common stock to be issued in connection with the proposed transaction.
• A definitive Information Statement/Proxy Statement/Prospectus will be sent to Semler Scientific stockholders to seek their approval of the proposed transaction.
• Strive plans to issue perpetual preferred equity in 2025.
• Strive will look at opportunities to potentially spin off Semler's healthcare business.
• The closing of the proposed transaction is pending conditions being met.

Key Dates

Recommendation

The acquisition of Semler Scientific by Strive is presented as a highly strategic and mathematically accretive transaction, leveraging Bitcoin as a core treasury asset. The significant premium offered to Semler shareholders (200%) and the innovative financial structures being pursued by Strive, including the planned perpetual preferred equity issuance, suggest strong growth potential and a forward-thinking approach. While the high cost to borrow Strive's stock indicates market skepticism or arbitrage plays, the long-term vision of integrating Bitcoin into corporate finance, coupled with the potential spin-off of the healthcare business, positions Strive for unique value creation in a nascent but rapidly evolving sector. This represents a 'buy' opportunity for investors with a high tolerance for volatility and a belief in the long-term value of Bitcoin-backed corporate strategies.

Keywords

Strive Inc, Semler Scientific, Bitcoin, Acquisition, Merger, M&A, Treasury Strategy, Digital Assets, Corporate Governance, Financial Innovation, Perpetual Preferred Equity, Healthcare Spin-off, SEC Filing, Form 425