425: Strive Acquires Semler Scientific, Amplifying Bitcoin Treasury

Strive, Inc. announces a cashless, all-stock acquisition of Semler Scientific, integrating 5,021 Bitcoin and aiming to disrupt traditional finance with Bitcoin-backed strategies.

Summary

• Strive, Inc. has acquired Semler Scientific, Inc. in a cashless, all-stock transaction, which is accretive in Bitcoin per share terms.
• Semler Scientific holds 5,021 Bitcoin, contributing to Strive's goal of building a significant Bitcoin war chest and becoming the 'meta Planet' of the United States.
• The merger is expected to improve the combined entities' collateralization rating by over 200% on Semler's existing convertible bond, enhancing credit quality and access to larger capital pools.
• The discussion highlights the early stages of Bitcoin Treasury companies, emphasizing their potential to disrupt the $300 trillion fixed income market with innovative Bitcoin-backed securities.
• MicroStrategy's various Bitcoin-backed instruments, such as the 8x overcollateralized STRF perpetual preferred equity and STRC (a high-yield savings account alternative), are presented as examples of superior financial products.
• A critique of traditional equity market risk pricing is offered, contrasting companies leveraged to future cash flows (e.g., Nvidia's $4 trillion valuation with $54 billion capital) with Bitcoin Treasury companies leveraged to existing, appreciating assets.
• The long-term vision is for every company to eventually hold Bitcoin on its balance sheet, leading to a fundamental reshaping and recapitalization of the global financial system.
• The current market for Bitcoin Treasury companies is described as the 'most hated rally' due to a lack of understanding from both traditional finance and some Bitcoiners regarding leverage finance and Bitcoin's role.

Sentiment

Score: 9

Explanation: The filing expresses strong optimism regarding Bitcoin's role in corporate treasuries and financial markets, highlighting significant advantages of Bitcoin-backed securities over traditional instruments and the accretive nature of Strive's recent acquisition. The overall tone is highly bullish on the future of Bitcoin in finance.

Positives

• Acquisition of Semler Scientific adds 5,021 Bitcoin to Strive's treasury in a cashless, all-stock transaction, which is accretive in Bitcoin per share terms.
• The combined entities' credit quality and collateralization rating are expected to improve significantly, with over 200% improvement on Semler's convertible bond.
• Increased company size and balance sheet from the merger provide access to larger pools of capital.
• Potential for value accretion from Semler's operating business by leveraging Strive's expertise, particularly in preventative healthcare.
• Bitcoin Treasury companies offer lower volatility, Bitcoin-like exposure with diverse risk profiles, appealing to various investors.
• Bitcoin-backed credit instruments are presented as superior to traditional fixed income, offering higher yields, greater liquidity, less risk, and better collateralization.
• The ability to calculate credit risk 24/7/365 for Bitcoin-backed instruments provides transparency unmatched by traditional quarterly reporting.
• MicroStrategy's perpetual preferred equities, like STRF (8x overcollateralized with ~9-9.5% interest) and STRC (designed for stable principal and monthly dividends), demonstrate successful financial innovation.
• The perpetual preferred equities feature a daily refinancing mechanism, allowing companies to tap capital efficiently.
• Bitcoin is actively taking over financial infrastructure, recapitalizing the system with superior collateral, which is viewed as a positive long-term trend.
• Companies holding Bitcoin as permanent capital are expected to positively influence the long-term Bitcoin price.

Negatives

• The 'paper Bitcoin summer' has led to blowback and skepticism towards Bitcoin Treasury companies due to recent market performance.
• There is current hesitancy in the equity market for Bitcoin-related companies, with capital flowing towards AI-related ventures.
• Terms for convertible bonds are currently tighter than historical averages and what MicroStrategy can command.
• A significant portion of participants in MicroStrategy's perpetual preferred IPOs are primarily interested in arbitrage from repricing events, not the product's underlying risk profile.
• The market generally lacks understanding of the risk profiles and benefits of Bitcoin-backed securities, hindering broader adoption.
• Most Bitcoin Treasury companies, aside from MicroStrategy, have small market caps (under $2-3 billion) and exhibit high volatility.
• A primary risk is a prolonged 80-90% drop in Bitcoin price, which could impair the ability to pay dividends on Bitcoin-backed instruments.
• Traditional financial professionals often do not understand Bitcoin, while many Bitcoiners do not understand leverage finance, creating a disconnect.
• Risk is globally mispriced, with traditional equities (e.g., Nvidia's $4 trillion valuation on $54 billion capital) relying heavily on uncertain future cash flows, contrasting unfavorably with Bitcoin-backed balance sheets.
• Incentives for large, established companies are not aligned to prioritize Bitcoin accumulation over stock buybacks.
• MicroStrategy's delayed inclusion in the S&P 500, despite meeting technical qualifications, highlights the subjective nature of committee-based index decisions.

Risks

• Bitcoin price volatility, including potential 80-90% drops for extended periods, could impact the ability to pay dividends on Bitcoin-backed instruments.
• Integration of Strive and Semler Scientific may be more difficult, time-consuming, or costly than expected.
• Management's attention may be diverted from ongoing business operations and opportunities due to the merger.
• Dilution could occur from Strive's issuance of additional 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 may arise from the announcement or completion of the proposed transaction.
• Changes in Strive's or Semler Scientific's share price before closing could impact the transaction.
• General economic and market conditions, interest and exchange rates, monetary policy, and changes in laws and regulations and their enforcement pose risks.
• Risk is mispriced globally across equities and fixed income, particularly in frothy markets with high P/E and price-to-book ratios, which could lead to significant corrections.
• The 'most hated rally' phenomenon, driven by a lack of understanding of Bitcoin and leverage finance in traditional financial circles, could lead to continued market skepticism and volatility.

Future Outlook

Every company on the planet is expected to eventually hold Bitcoin on its balance sheet, leading to a fundamental reshaping of the global financial system. Strive aims to be the 'meta Planet' of the United States by building a massive Bitcoin war chest and issuing perpetual preferred securities. The market for Bitcoin Treasury companies is in its early stages but is anticipated to grow drastically, with the perpetual preferred marketplace potentially increasing 10x to 100x in the next 5-10 years. A significant repricing of physical risk relative to digital risk is expected over the next decade, and more operating businesses will leverage Bitcoin treasury strategies. MicroStrategy and dozens of other Bitcoin-holding companies are projected to be included in the S&P 500 within 4-8 years, despite initial resistance. This transformation is described as the 'most hated rally' due to its disruptive nature.

Management Comments

• "The fixed income market is a $300 trillion pool of capital. If you want to make the biggest splash in Bitcoin, you disrupt the fixed income market."
• "MicroStrategy has amplified Bitcoin. This is a monumental idea."
• "Every single company on the planet will eventually be holding Bitcoin on the balance sheet."
• "Us at Strive, we're aiming to be the meta Planet of the United States."
• "The collateralization rating actually improves by over 200% on the convertible bond when you combine the two entities in the Bitcoin back balance sheet."
• "Semler... were a self proclaimed zombie company, and then they started buying Bitcoin and and ended up accumulating over $500 million of Bitcoin."
• "Our incentives are to increase Bitcoin per share, and this transaction is accretive in Bitcoin per share terms."
• "The goal of STRC is to provide stable principal value and provide a dividend each month."
• "The risk is Bitcoin risk, volatility risk... the price of Bitcoin falls 80 90% and stays there for an extended period of time, for eight years."
• "Bitcoin is taking over financial infrastructure, which is a good thing. They're beginning to recap the whole financial system with Bitcoin."
• "This is so hated because people don't understand so many people don't understand Bitcoin in the traditional financial world and but they understand leverage finance. And then so many of the Bitcoiners don't understand, they don't understand leverage finance."
• "It will be the most hated rally. I think that the next decade of these will be the most hated rally is because you're literally turning everybody's world upside down and reshaping it."

Industry Context

The filing highlights a significant and accelerating trend of publicly traded companies adopting Bitcoin treasury strategies, with MicroStrategy as the pioneering benchmark. Strive's acquisition of Semler Scientific represents a differentiated approach, integrating an operating business with a substantial Bitcoin treasury, aiming to create a 'meta Planet' in the US. This move underscores the belief that Bitcoin can fundamentally disrupt traditional capital markets, particularly the $300 trillion fixed income market, by offering superior risk-return profiles through innovative Bitcoin-backed securities. The discussion also critiques the mispricing of risk in traditional equities and emphasizes the broader shift towards digital assets as a more robust form of corporate capital.

Comparison to Industry Standards

• MicroStrategy (MSTR) serves as the primary benchmark for Bitcoin treasury strategy, having accumulated 638,000 Bitcoin. Strive aims to replicate and potentially exceed this scale, aspiring to be the 'meta Planet' of the US.
• MicroStrategy's perpetual preferred equities (STRF, STRC) are presented as innovative financial instruments, offering significantly higher yields (STRF at ~9-9.5%) and better collateralization (STRF is 8x overcollateralized) compared to traditional fixed income products.
• Semler Scientific's transformation from a 'self-proclaimed zombie company' to one holding over $500 million in Bitcoin demonstrates the potential for Bitcoin treasury strategies to revitalize struggling operating businesses.
• Nvidia, with a $4 trillion valuation but only $54 billion in balance sheet capital and a P/E ratio of 50.95-51, is cited as an example of mispriced risk in traditional equities, contrasting with the asset-backed nature of Bitcoin Treasury companies.
• CrowdStrike, despite a $110 billion market cap, is noted to have 'lost 18,000 Bitcoin' in terms of earnings over 21 quarters when viewed through a Bitcoin lens, highlighting the depreciation of fiat-denominated earnings compared to Bitcoin accumulation.
• Large corporations like Apple (estimated $604-704 billion in buybacks over 10 years) and Chevron ($70 billion buyback in 2020-21) are used to illustrate how redirecting capital from stock buybacks to Bitcoin could have yielded substantially greater value.
• MicroStrategy's delayed inclusion in the S&P 500 is compared to similar delays for Tesla, AppLoving, and Robinhood, emphasizing the subjective nature of the S&P committee versus the technical qualifications for index inclusion, while noting that Bitcoin-holding companies like Tesla, Coinbase, and Block are already in the index.

Management Changes

Legal Proceedings

• Potential legal proceedings that may be instituted against Strive or Semler Scientific or the combined company related to the proposed transaction.

Stakeholder Impact

• **Shareholders (Strive & Semler Scientific)**: Anticipated value accretion through Bitcoin per share growth, increased credit quality, and access to new capital pools. Strive shareholders face potential dilution from stock issuance for the transaction. Semler Scientific stockholders need to approve the merger.
• **Investors (General)**: New investment opportunities in Bitcoin-backed equities and preferred securities are emerging, offering potentially superior risk-return profiles compared to traditional fixed income instruments.
• **Customers (Strive & Semler Scientific)**: Potential for adverse reactions or changes to business relationships due to the merger.
• **Employees (Strive & Semler Scientific)**: Potential changes to employee relationships as a result of the merger.
• **Fixed Income Market Participants**: The market faces disruption and potential repricing of risk as Bitcoin-backed instruments offer higher yields and better collateralization, drawing capital away from traditional offerings.

Next Steps

• Strive intends to file a Registration Statement on Form S-4 with the SEC to register Class A common stock for 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 securities in the future.
• Continued growth and adoption of Bitcoin treasury strategies by more companies are anticipated.
• MicroStrategy and other Bitcoin-holding companies are expected to be included in the S&P 500.
• Ongoing education of the market about Bitcoin-backed securities and their risk profiles will continue.
• James Check will break down ETF flows and institutional allocation in a session on September 30.

Key Dates

Recommendation

Strive's strategic acquisition of Semler Scientific, a cashless all-stock deal, is highly accretive in Bitcoin per share and significantly enhances the combined entity's credit quality and access to capital. The company's aggressive and innovative approach to Bitcoin treasury strategies, coupled with a clear vision for disrupting traditional financial markets, positions it for substantial long-term growth. The strong bullish sentiment from management regarding Bitcoin's future integration into corporate finance and the superior risk-return profile of Bitcoin-backed securities suggest a compelling investment opportunity for seasoned investors.

Keywords

Bitcoin, Treasury Strategy, Strive, Semler Scientific, Acquisition, M&A, Capital Markets, Fixed Income, Perpetual Preferred Equity, Convertible Bonds, Risk Management, Corporate Finance, Digital Assets, Financial Innovation, MicroStrategy, Corporate Governance, SEC Filing