Benchmark-StoneX Initiates 'Buy' Rating on Strive, Praising Debt-Free Framework

In brief

Benchmark-StoneX initiated a "Buy" rating on Strive, praising its “nimble” debt-free framework and preferred stock.

Strive expanded its holdings to 19,000 BTC ($1.3 billion) and announced plans to increase an issuance program by $4.2 billion.

Despite targeting the same group of investors, analyst Mark Palmer described Strive and Strategy as friendly rivals.

Strive received a nod of approval from Benchmark-StoneX analysts on Tuesday after the Bitcoin-buying asset manager padded cash reserves while growing its stockpile.

In an SEC filing, Strive indicated that it purchased 2,500 Bitcoin last week, expanding the company’s holdings to 19,000 Bitcoin worth $1.3 billion. At the same time, the firm raised $44 million for the purpose of ensuring that dividends on its preferred stock can be paid.

Like Strategy, Strive has devised a variable-rate product dubbed SATA, which will offer a 13% annual dividend in daily payouts—starting June 16—making it the first listed security in the U.S. to offer routine daily dividends as opposed to traditional quarterly or monthly distributions.

It may seem like Strategy and Strive are competing for the same market, but their businesses actually complement each other, Benchmark-StoneX analyst Mark Palmer told Decrypt. That’s because both companies are committed to furthering the concept of “digital credit.”

“This is not a zero-sum game,” he said. “If more investors see digital credit as being an attractive new asset class, then that’s going to benefit all of those participants in that space.”

The investment bank initiated Strive coverage with a “Buy” rating and $32 price target. On Tuesday, the firm’s shares fell 6.6% to $16.06, as market jitters sparked in part by Strategy’s first Bitcoin sale since 2022 weighed on markets, according to Yahoo Finance.

At the same time, Strive is doubling down on its playbook. As the daily dividends draw closer, Chairman and CEO Matt Cole said Monday that Strive plans to increase the size of a program allowing Strive to issue an additional $2.1 billion each in both common equity and SATA.

While the size of Strive’s stockpile represents just 2.2% of Strategy’s stash, the firm’s framework “differentiates it from most other Bitcoin treasury companies that continue to rely on convertible debt, margin financing, or repeated common equity dilution,” the analysts wrote.

The investment bank’s optimistic outlook is rooted in SATA’s lack of refinancing and collateral risks. Because the dividend-paying product never matures and avoids the need for margin, the analysts noted that risks tied to cyclical downturns in Bitcoin’s price—that threaten to “destroy shareholder value” through forced deleveraging—have been mitigated.

SATA, like Strategy’s Stretch (STRC), is engineered to trade near its $100 par value. When the products trade above that threshold, the companies can issue more of the respective preferred stocks and capitalize on demand by purchasing Bitcoin with the proceeds.

Palmer described Strive as “nimble” because the firm was able to swiftly shift SATA’s dividend format while Strategy has asked shareholders to vote on bi-monthly distributions.

Meanwhile, he noted, Strive has shaken off the entirety of its debt, a process that Strategy has signaled could take anywhere from three to six years. A week before Strategy shaved its holdings, the company took a 61% chunk out of its cash buffer to repurchase some debt.

In a separate note, the investment bank’s analysts reiterated a “Buy” rating and $570 price target for Strategy, arguing that the market wrongly treated the company’s atypical sale of 32 Bitcoin “as if it were a betrayal of the company's founding creed.”

“In our view, the transaction demonstrated that Strategy has the flexibility to meet obligations without materially impacting its Bitcoin ownership,” they added. We expect the company to remain a significant and aggressive net buyer of bitcoin, funded primarily through issuance of STRC.”