Can Michael Saylor's $8.3 billion debt be resolved with a permanent preferred stock strategy?

New pathways are being explored to address the large debt burden faced by Strategy’s Michael Saylor. Recently, the perpetual preferred stock conversion strategy initiated by crypto asset manager Strive has provided a blueprint for Michael Saylor and Strategy, with evaluations suggesting that this approach could significantly reduce refinancing risks.

Strive’s Perpetual Preferred Stock Conversion Strategy

Last week, Strive issued over $150 million of SATA variable-rate Series A perpetual preferred stock at $90 per share through a follow-on offering. This transaction combined a public offering with a private debt exchange, enabling the issuance of a total of 2.25 million SATA shares.

Strive plans to use these funds to repay part of Semler Scientific’s 2030 maturity senior convertible bonds. Approximately $90 million of bonds will be directly exchanged for shares, with 930,000 newly issued SATA shares exchanged for convertible bonds. The additional proceeds from the offering, existing cash, and potential gains from the call transaction termination are expected to be used for bond repayment, repayment of credit facility loans, and additional Bitcoin purchases.

A Blueprint for Michael Saylor and Strategy to Follow

Currently, Michael Saylor’s Strategy holds about $8.3 billion in outstanding convertible bonds, with the most notable being a $3 billion tranche with a conversion price of $672.40 set for June 2028. Given the current stock price of around $160, the conversion price is approximately 300% higher than the current level.

Strive’s strategy offers important implications for Michael Saylor. Instead of refinancing or extending maturing debt, it is possible to overcome structural risks by converting fixed-maturity debt into perpetual preferred stock. This approach could serve as a template for Strategy’s future debt repayment strategies.

Structural Benefits of Converting Debt into Equity

The biggest advantage of the perpetual preferred stock conversion strategy is the improvement in reported financial metrics. SATA currently pays a variable dividend set at 12.25%, with no maturity or conversion features. Since preferred stock is classified as equity rather than debt, leverage ratios improve, and the company’s financial flexibility is enhanced.

From the creditors’ perspective, this structure is attractive. Instead of existing convertible bonds that could be converted into stock, creditors receive a higher-yield, perpetual, fully liquid financial instrument. At the same time, preferred stock has senior rights over common stock, reducing risk.

What is particularly noteworthy is that Strategy’s perpetual preferred securities recently exceeded the nominal value of its convertible bonds. This indicates that the market views this structural conversion positively. Led by Michael Saylor, Strategy is expected to gradually repay or exchange its large-scale convertible bonds with many years remaining until maturity, significantly reducing future maturity risks.

Strive’s proactive strategy presents a new way for large debt-holding companies like Michael Saylor to restructure debt and manage financial risks.