Tom Lee imitates Saylor's strategy to finance BitMine

Bitmine (BMNR), the Ethereum treasury company co-founded by Tom Lee, filed on Wednesday with the SEC a perpetual preferred stock offering at 9.5% annual dividend, aiming to raise up to 300 million dollars. The move replicates the financing scheme that Strategy made popular in the crypto treasury sector. But does this model really withstand the market test?

Bitmine seizes the Strategy manual

Tom Lee, co-founder of Fundstrat, has chosen to align with the financing strategy that Michael Saylor structured at Strategy (MSTR). Bitmine thus issues 3 million perpetual Series A preferred shares, at 100 dollars each, with a 9.5% annual dividend rate. The payment, weekly, remains conditional on a board of directors decision.

This operation fits within a broader trend: several digital asset treasury companies now use hybrid instruments to diversify their capital sources. 

Strategy itself has launched several categories of preferred shares, while Strive (ASST) followed with its own SATA securities. Bitmine intends to apply this logic to its Ethereum holdings, accumulated to over 5.3 million ETH in the past year.

A risky bet amid sector pressure

The timing of this raise raises questions nonetheless. On Wednesday, Strategy’s STRC preferred stock fell 5%, dropping below its nominal value of 100 dollars, while Strive’s SATA shares traded around 97 dollars. 

Investors question these companies’ ability to maintain their dividend payments in a depressed price environment.

Bitmine’s exposure fully illustrates this risk. The company holds more than 5.3 million ETH acquired partly when Ethereum was trading around 5,000 dollars last October. With the price below 1,800 dollars at filing, the unrealized loss exceeds 9 billion dollars. 

Moreover, Strategy itself has recently sold 32 bitcoins for the first time since 2022, partly to finance its obligations related to its own preferred shares, a signal that has unsettled the market.

The document filed with the SEC does not yet specify the allocation of the raised funds. However, BMNP shares offer holders a redemption right in case of major structural changes, with premiums ranging from 0% to 10% depending on the exercise date.

In sum, Bitmine is following a path blazed by Strategy, but in a sector where margins for error are shrinking. An unrealized loss of 9 billion on ETH, a dividend model under sector tension, and an unclear use of funds: these are the three unknowns the market will now watch. The next board of directors meeting on dividends could reveal whether the bet holds.