Strive Asset Management's merger with Asset Entities to unlock a 'tax-less' opportunity for investors to exchange bitcoin for stock

Strive Asset Management plans to merge with Asset Entities (ticker ASST) to form the first publicly traded Bitcoin asset management company, according to an announcement on Wednesday. The move would make the combined company the latest player in the corporate "Bitcoin treasury" space — a model pioneered by Michael Saylor’s Strategy.

Asset Entities is a provider of digital marketing and content delivery services while Strive Asset Management is a subsidiary of Strive Enterprises with around $2 billion in assets under management. The combined firm will operate under the Strive brand and remain listed on NASDAQ.

"Strive Asset Management intends to use all available mechanisms to build a Bitcoin war chest in a minimally dilutive manner to common shareholders and build a long-term investment approach designed to outperform Bitcoin, by using Bitcoin itself as the hurdle rate for capital deployment," Strive wrote in a statement. 

According to Strive, the firm's "reverse merger structure" unlocks several competitive advantages compared to other Bitcoin treasury companies, namely, in raising capital through a "first-of-its-kind" offering of combined company equity in exchange for BTC. Notably, this will be a "tax-free" transaction for investors under Section 351 of the U.S. tax code, a provision that enables the taxless exchange of "appreciated assets" for stock.

"This is an unlock," Strive CEO Matt Cole said at the Strategy World conference on Wednesday. "We all know Bitcoin goes to the moon very quickly. What that means is that all these OG Bitcoin holders have a lot of gains, so as Bitcoin treasury companies evolve a lot of them want to buy [coins] but will have to pay the IRS a tax gain. We’re able to do this in a tax-free manner after the close of this [merger]."

Cole noted this "bitcoin acquisition strategy will be accretive to the common equity holders," noting that "these OG Bitcoin holders will likely be longtime shareholders of the company."

Strive is the latest firm pursuing a Bitcoin treasury management thesis, which offers investors leveraged exposure to BTC through a publicly traded equity without having to own tokens outright. In April, for instance, Cantor Fitzgerald, SoftBank Group and Tether formed a new Bitcoin-buying entity called Twenty One Capital, led by Strike founder Jack Mallers.

Cole added that Strive and Asset Entities’ reverse merger will also open immediate access to a shelf registration statement to raise capital. The company plans to raise $1 billion through both equity and debt offerings. Also known as a shelf registration, these types of offerings enable a company to proactively register for potential securities issuances without necessarily committing to sales — a strategy pursued by several crypto management firms.

"There is opportunities to increase leverage beyond what you've seen today in Bitcoin treasury companies. The clear thing you have to look out for is 'what is the downside, how do you break these things?'" Cole said. "We can level up by providing explicit downside protection, and by doing that we can increase leverage."