425: Strive & Semler Merge to Form Bitcoin Treasury Giant

Strive, Inc. and Semler Scientific, Inc. announce an all-stock merger, creating the first combined Bitcoin Treasury company with over 10,000 Bitcoin on its balance sheet.

Summary

• Strive, Inc. and Semler Scientific, Inc. have agreed to an all-stock merger, forming the first combined Bitcoin Treasury company.
• The combined entity will hold more than 10,000 Bitcoin on its balance sheet.
• The strategic rationale includes driving down the cost of running a Bitcoin Treasury company through increased scale.
• The merger aims to leverage digital credit and a 'carry trade' strategy to potentially outperform Bitcoin itself over the long run.
• Semler's operating business will be reimagined with a broader mandate in preventative healthcare and biotech, utilizing expertise from Strive's co-founder Vivek Ramaswamy and other board members.
• Strive went public as a Bitcoin Treasury company just over a month prior to this announcement, and Semler Scientific was the second publicly listed U.S. Bitcoin Treasury company.

Sentiment

Score: 8

Explanation: The filing conveys a strong positive sentiment regarding the strategic benefits of the merger, emphasizing scale, cost reduction, and a differentiated approach to Bitcoin investment. While acknowledging market volatility and critics, management expresses high conviction in the long-term outperformance potential of the combined entity and its strategic direction.

Positives

• The merger creates a larger, more scaled Bitcoin Treasury company, potentially driving down operational costs.
• The combined entity will have a significant Bitcoin holding of over 10,000 BTC, establishing it as a major player.
• The strategy of using leverage and perpetual preferred equity aims to outperform Bitcoin's returns over the long term, offering a differentiated investment vehicle.
• The reimagining of Semler's operating business into preventative healthcare and biotech, leveraging Strive's expertise, could unlock new value for shareholders.
• Historical data suggests Bitcoin Treasury companies like MicroStrategy and Metaplanet have shown long-term outperformance over Bitcoin itself, supporting the strategic model.

Negatives

• The Bitcoin Treasury strategy involves inherent volatility, described as 'volatility on volatility'.
• There are periods where Bitcoin Treasury companies have underperformed Bitcoin drastically, as seen with MicroStrategy in 2022 and 2023.
• The broader cryptocurrency market is subject to significant liquidations and downward momentum, as evidenced by a recent $20 billion crypto liquidation event due to a Binance hack.
• Macroeconomic weakness in equity markets can filter through to the crypto market, impacting performance.
• Critics, such as Jim Chanos, have expressed skepticism about the strategy, labeling it 'financial gibberish' at times, particularly regarding valuations.

Risks

• The proposed transaction may not close as expected or at all if conditions to closing are not met.
• Legal proceedings could be instituted against Strive, Semler Scientific, or the combined company.
• Anticipated benefits, including cost savings and strategic gains, may not be realized due to changes in or problems with implementing Bitcoin treasury strategies.
• Risks associated with Bitcoin and other digital assets, general economic and market conditions, interest and exchange rates, monetary policy, and regulatory changes could impact the combined company.
• The integration of the two companies may be more difficult, time-consuming, or costly than anticipated.
• The proposed transaction may be more expensive or take longer to complete than expected due to unforeseen factors.
• Management's attention may be diverted from ongoing business operations and opportunities during the merger process.
• Dilution for existing Strive shareholders may occur due to the issuance of additional Class A common stock for the merger.
• Potential adverse reactions from customers or changes to business/employee relationships could arise from the announcement or completion of the transaction.
• Changes in Strive's or Semler Scientific's share price before closing could impact the transaction's value.

Future Outlook

The combined company anticipates driving down costs through scale and outperforming Bitcoin over the long run using digital credit and a carry trade strategy. Semler's operating business is expected to expand into preventative healthcare and biotech, leveraging Strive's co-founder Vivek Ramaswamy's expertise. Despite short-term market volatility and recent liquidations, the long-term outlook for Bitcoin and Bitcoin Treasury companies is viewed positively, emphasizing a 'zoom out' mentality.

Management Comments

• This is the first merger of two Bitcoin Treasury companies.
• Combining scale drives down the cost of running a Bitcoin Treasury company.
• A Bitcoin Treasury company is effectively an operating company on one side and a hedge fund doing various things to outperform Bitcoin itself over the long run, revolving around digital credit and a carry trade.
• We are reimagining a broader mandate for Semler's operating business, leveraging people like our co-founder Vivek Ramaswamy and other board members with expertise in preventative healthcare and biotech.
• A Bitcoin Treasury company has access to leverage, perpetual preferred equity that has no margins, not callable, which is not accessible to an individual or a fund, allowing the carry trade to outperform Bitcoin itself over the long run.
• Over the long run, these strategies can work, but they are 'volatility on volatility'.
• If MicroStrategy's strategy was 'gibberish', then even if its valuation collapsed, it would have still outperformed Bitcoin itself by multiple x's since implementation.
• Companies that have been 'all in' on Bitcoin have long-term outperformance over Bitcoin that is 'pretty unreversible'.
• The recent $20 billion crypto liquidation was around a hack in Binance, impacting crypto-native traders and market makers, causing liquidity problems and downward momentum.
• There is not a single four-year period in Bitcoin's entire history where there's been a single negative period of return over that time, emphasizing a 'zoom out' mentality.

Industry Context

This merger represents a significant consolidation in the nascent but growing sector of publicly traded Bitcoin Treasury companies, following the path blazed by pioneers like MicroStrategy. It highlights a strategic approach to gain exposure to Bitcoin while attempting to generate alpha through financial engineering (leverage, carry trade) and operational diversification. The announcement comes amidst broader crypto market volatility, including a recent large liquidation event, underscoring the high-risk, high-reward nature of the digital asset space. The move also signals a potential convergence of traditional corporate strategy with digital asset investment, particularly with the integration of healthcare and biotech initiatives.

Comparison to Industry Standards

• The strategy of using leverage and a carry trade to outperform Bitcoin is comparable to MicroStrategy's approach, which has shown periods of drastic outperformance (e.g., late last year) and underperformance (e.g., 2022, 2023) relative to Bitcoin.
• Metaplanet is also cited as a comparable company that has demonstrated long-term outperformance over Bitcoin through an 'all-in' strategy.
• The combined entity's holding of over 10,000 Bitcoin positions it as a significant holder, though still smaller than MicroStrategy's holdings (which are in the hundreds of thousands of BTC).

Legal Proceedings

• The occurrence of any legal proceedings that may be instituted against Strive or Semler Scientific or the combined company is listed as a risk factor for the proposed transaction.

Stakeholder Impact

• Shareholders of Semler Scientific will receive Strive's Class A common stock, requiring their approval for the merger.
• Existing Strive shareholders may experience dilution due to the issuance of new shares.
• Customers and employees of both companies could experience adverse reactions or changes to relationships as a result of the merger announcement or completion.
• The combined company aims to drive better value for shareholders through scale and strategic initiatives.

Next Steps

• Strive intends to file a Registration Statement on Form S-4 with the SEC to register the Class A common stock to be issued.
• The Registration Statement will include an Information Statement/Proxy Statement/Prospectus.
• A definitive Information Statement/Proxy Statement/Prospectus will be sent to Semler Scientific stockholders to seek their approval of the proposed transaction.
• Investors and stockholders are urged to read the Registration Statement and Information Statement/Proxy Statement/Prospectus when they become available.

Key Dates

Keywords

Bitcoin Treasury, Merger, Strive Inc, Semler Scientific, Cryptocurrency, Digital Assets, Preventative Healthcare, Biotech, Corporate Governance, SEC Filing