Vivek Ramaswamy jumps on the next new thing, a Bitcoin treasury company, with a 'mad science' twist -- a reverse merger and tax-advantaged investments to build a $1 billion crypto horde

Vivek Ramaswamy, who built an anti-ESG ETF company managing $2.1 billion in assets, is jumping into the next big new thing – a Bitcoin treasury company.

Ramaswamy is best known for his ties to President Donald Trump and, for a time, his role as a co-head of Elon Musk's “Department of Government Efficiency (DOGE).”

Now he appears to be keying his latest venture off of Trump's Mar. 2 executive order, announcing the formation of a massive Bitcoin reserve. 

Ramaswamy announced his move on May 7; it will be patterned, in part, on Bitcoin guru Michael Saylor's rebranding in February of his software company, MicroStrategy, into a Bitcoin treasury company. 

Now called “Strategy Inc.," Saylor claims the new entity is “the world’s first and the largest independent, publicly traded crypto treasury." It trades on the Nasdaq under the symbol MSTR. 

Mad science

Saylor stocked up on Bitcoin using traditional financing, tapping capital markets—selling additional shares in the company and issuing convertible debt— to build on a cryptocurrency horde his company began accumulating in 2020, according to Fortune magazine.

Ramaswamy is trying to do the same thing with Strive, which he founded in 2022, with one key difference. He's building his treasury on a complex series of transactions to raise $1 billion in Bitcoin and $2 billion overall, without traditional financing. 

“It’s not about buying Bitcoin [and] diluting shareholders … You actually need to do it in a way that accretes value,” Ramaswamy noted of Saylor's “innovative” reserve strategy, in a May 7 presentation.

Needless to say, some analysts are scratching their heads.

“Strive is either brilliant beyond my capacity, or pure insanity … this is a mad scientist fund,” says Wall Street veteran Philip Waxelbaum, principal of Masada Consulting, in an email exchange.

“It is an opportunist, hoped-for financial conglomerate; more simply, every trader's dream, as an operating company, [giving them] the chance to buy, [or] own whatever will work in the moment,” he adds.

Cash at a discount

The plan hinges on attracting “tax-free” investments under Section 351 of the IRS tax code – ostensibly in Bitcoin – through a reverse merger with a publicly listed $109 million social media marketing company called Asset Entities (ASST). 

The new company will be an offshoot of his ETF company, Strive Investment Management. 

The Section 351 transfers are only part of the equation. 

The newly formed company also plans to acquire cash at a discount by merging with so-called “distressed” publicly traded companies, "whose equity values are below their net cash positions," according to the company.

Unlocking leverage

Such deals will create “a potential multi-billion dollar opportunity to acquire Bitcoin in a manner accretive to common equity,” the company states. 

Strive says it also plans to unlock additional leverage to accumulate Bitcoin by "hedging risk in novel ways using in-house fixed income and derivatives expertise.”

The ASST reverse merger structure will give the combined company immediate access to an effective shelf registration statement filed with the Securities and Exchange Commission (SEC). That will allow Strive to issue securities "off the shelf," typically for up to three years, without new registrations for each offering. 

From there, it plans to expand to at least "$1 billion post-closing to support Bitcoin accumulation through both registered equity and debt offerings, to be used when accretive to common equity,” it states in a release. 

New Standard

Ramaswamy stepped back as Strive's executive chairman in Feb. 2023 to focus on his presidential campaign. He dropped out of the race the following January. Building the treasury falls to Matt Cole. He replaced Ramaswamy, became the company's first chief executive in 2023, and recently became chairman. 

Cole spent 15 years at CalPERS, the giant California teachers' pension fund. He started in research and progressed to managing a $30 billion structured securities portfolio and a $40 billion U.S. Treasury portfolio. 

“In today's environment of increasing capital scarcity and rising interest rates, businesses and institutions must rigorously evaluate their internal investments against a meaningful hurdle rate*," he says in a pitch deck linked to the deal.

“Bitcoin, as a fixed supply asset, is emerging precisely at this moment as the ideal benchmark – serving as a new standard for measuring the opportunity cost of capital … [so] internal projects must now surpass Bitcoin's returns to justify capital,” he adds.

Strategy copycats could face headwinds, however, according to a recent Bloomberg report. 

The report notes that the 'Bitcoin reserve' strategy is "increasingly crowded," and that even Strategy has had to "sweeten" and "juice" deals and returns to bring in new investment. 

Still, Saylor has lifted Strategy's share price by 3,200%, from the low teens to $411.94 today, by riding a historic bull run in the crypto market.

Crowded market

Cantor Fitzgerald LP, headed by Howard W. Lutnick until he left to become Trump's Commerce Secretary, is leading the pack. Under his 27-year-old son Brandon's direction, the firm is partnering with Tether Holdings SA and SoftBank to launch an affiliated treasury company called Twenty One Capital, Inc.

At least 50 publicly traded companies have BTC treasury holdings, led by Strategy with a $57.7 billion horde, according to Bitcoin Magazine Pro. Cantor also owns a $1.5 billion stake in MicroStrategy.

Other companies with $1 billion-plus in holdings include Marathon Digital Holdings (MARA), Tesla, Inc. (TSLA), Riot Platforms, Inc. (RIOT), CleanSpark Inc. (CLSK), and Hut 8 Mining Corp. (HUT). All trade on the Nasdaq. 

Even video-game retailer and former meme stock, GameStop Corp. (GME) announced a board-approved plan in March to add Bitcoin as a treasury reserve asset, according to Bloomberg. 

The upshot is a surge of new stock offerings flooding the market, all backed by Bitcoin. The glut caused Strategy to offer buyers lower premiums on convertible debt conversions in March, while sharply discounting a preferred stock offering in February, in a bid to up its holdings to $84 billion, Bloomberg reported. 

Ramaswamy's Strive will be flying into those headwinds in its effort to raise $2 billion, with an initial plan to purchase $1 billion worth of Bitcoin. The ambitious goal makes its financing strategy critical.

The taxman cometh

Strive's key advantage could be to offer the opportunity to "select" accredited investors – typically with at least $1 million in net worth and income exceeding $200,000 a year – to buy equity “tax-deferred” through a Section 351 exchange.

The arrangement could draw in as much as $1 billion of Bitcoin from investors looking to defer capital gains taxes, according to the company. But it's not totally clear how the investments will be structured to meet IRS code requirements. 

“If an individual investor's Bitcoin holdings are a significant portion of their overall contribution, it might not meet the diversification requirements [of the code],” says Rich Austin, executive director, estate and business planning, at RIA firm Integrated Partners. 

Ben Henry-Moreland, a Senior Financial Planning Nerd with Kitces.com, adds: "The key with Section 351 is that property contributed by ‘one or more persons’ in exchange for equity is eligible for tax-deferred treatment as long as the transaction results in those persons owning at least 80% of the outstanding equity afterward.”

"In looking over the [Strive] promotional materials, my impression is that you've got Bitcoin owners and Strive owners simultaneously exchanging their assets for equity in ASST. 

“After the exchange, those parties (the former Bitcoin and Strive owners) will presumably own in aggregate over 80% of ASST equity, which is the ticket for tax deferral under Section 351,” he says. 

“So even though no individual Bitcoin contributor will own more than 80% of ASST after the exchange, that's fine under Section 351 as long as all the contributors of Bitcoin/Strive collectively own at least 80%.”

Ramaswamy's umbrella company, Strive Enterprises, will reportedly own 94.2% of the newly combined public company, before attracting Bitcoin, while shareholders of Asset Entities will receive a 5.8% share, according to the company. 

“The structure is brilliant simplicity,” says Waxelbaum.

“It smells like a SPAC, but the liberal use of ‘potential’ 351 exchange capital enhancement through Bitcoin swaps is wild,” he adds.

Building a ‘war chest’

If its reverse merger passes regulatory muster, Strive will use a mix of debt and the $1 billion* it aims to raise to buy a large Bitcoin reserve, and what it deems are 'overcapitalized' companies, trading at a discount to their real value.

“We are currently evaluating various strategic opportunities [to buy other firms], and may announce the first of such deals in the near term,” the company states in its pitch deck.

“We plan to acquire public companies trading below net cash, allowing us to buy Bitcoin at a discount. 

"This repeatable strategy targets over $30 billion in stranded capital across distressed but overcapitalized firms,” it adds.

Indeed, Strive “intends to use every possible mechanism, including equity, fixed income, options, additional mergers, and tax-free Bitcoin exchanges to build a Bitcoin war chest, [and] build a long-term investment approach designed to outperform Bitcoin,” the company states in a release.

Gordon Gecko would be proud, says Waxelbaum.

It's a "good old-fashioned 1980s unlocking strategy. Grab the cash and bulldoze any remaining operating company efficiently and at the lowest possible cost of destruction and disposal. 

“The reason the company is [at] a discount to cash is because existing owners can't shut it down or otherwise dispose of it efficiently … [but Strive] doesn’t spend any time covering value realization and liquidation strategies, [and] that answer would tell all," Waxelbaum says.

Strive has yet to answer when it expects the ASST deal to close, what the reverse merger values Strive, and whether it already has accredited Bitcoin investors lined up to buy equity, which they can do until Summer 2025, according to the pitch deck.

Bitcoin advocate

Cole has semi-officially updated Strive's "mission," making support for Bitcoin a key principle, besides lobbying publicly and privately to block environmental, social, and governance (ESG) and diversity, equity, and inclusion (DEI) policies.

“Corporations that set Bitcoin as the hurdle rate … will maximize long-run value to shareholders. That's why Strive will unapologetically push corporations to adopt a Bitcoin strategy, just like we push [against] ESG and DEI,” says Cole, in the company pitch deck.

The pitch deck notes a company belief that some 60 firms in which it holds shares, including AMD and Motorola, dropped ESG incentives from executive pay plans, following pressure from Strive.

The reverse merger with Asset Entities, which sells outsourced social media marketing support and content creation services, will also help Strive push its pro-Bitcoin message, the company states, in the release linked to the deal.

Strive will use its asset management business, via proxy voting, to proselytize for Bitcoin, pushing the roughly 1,800 publicly traded companies it owns shares in to "incorporate a Bitcoin treasury strategy," the company confirms, in a release.

Cole has yet to answer why Strive specifically chose Asset Entities as the marketing firm that it would buy, over and above any other.

The pitch deck linked to the deal states that Asset Entities has a "unique," "tight-knit" social media community with a social following of around 2 million.

RIA goes solo

Some 7,659 advisor practices, including RIAs and broker-dealer-based practices, now hold some allocation in Strive-managed funds, including its now 13 ETFs, according to the firm.

Yet Strive's parent company, Strive Enterprises, will not form part of the reverse merger with Asset Entities, because Ramaswamy and Cole have opted to separate the firm's July 2024-launched roll-up unit and wealth management business from its asset manager.

Today, Strive Wealth Management states that it provides investment management, financial planning, and crypto investing.

It has not publicly disclosed any successful RIA roll-ups to date, despite Cole's declaration that he would welcome all-comers.

“Strive as a business, and our wealth management segment will be mission-focused. We're interested in roll-up discussions with teams and RIAs that believe in excellence, innovation, meritocracy, and capitalism," he told RIABiz via email. 

The company, which has raised $50 million in total, has yet to answer whether Cole will stay on as CEO of the wealth unit, as well as at Strive Asset Management. 

Nor did it answer how it intends to divide its recent $30 million venture capital raise, or if its continued addition of new business lines indicates a natural evolution of a "clear vision," or if it is struggling to find its true "identity," given the political background underpinning its launch.

Business, politics

In fact, Strive's business has always been a mix of business and political bets, and its latest is no different.

Today, it clearly carries the influence of both Ramaswamy's political ties, and Cole's belief that American corporations will boom if they sweep away "unmeritocratic" corporate policies like support for environmental protection laws.

Ramaswamy, who left Trump's and Musk's controversial and unofficial ‘Department of Government Efficiency’ (DOGE) in January, has Trump's backing to become the next Ohio governor, and he frequently rubs shoulders with Lutnick as well.

Ramaswamy has pledged to make Ohio the "bleeding edge" of the US economy, should he succeed, despite moving his firm from Ohio to Dallas last November, and his firm's crypto advocacy again ties him back to Lutnick and Trump. 

Lutnick is a big believer in the dollar-pegged stablecoin, Tether, and Trump launched a memecoin, sparking corruption allegations, earlier this year. See: Cantor Fitzgerald IA CIO sends midday letter to RIAs with take that reassures on tariffs.

Vice President JD Vance, who competed with Ramaswamy to be Trump's running mate, and Silicon Valley MAGA heavyweight Peter Thiel are also investors in Strive.

Saylor, whose strategy Strive accepts as influencing its reverse merger, praised Trump for ‘making history,’ in March. See: JD Vance joins Strive backers, including mentor Peter Thiel.

Strive also counts several vocal billionaires as early-stage investors, including hedge fund manager Bill Ackman and serial RIA entrepreneur Joe Lonsdale. See (Briefs): Bill Ackman scolds Trump, Lutnick for tariff overkill.

Fine details

Should Strive's merger with Asset Entities go through, Cole will continue as CEO and chair, but he will be joined by current Asset Entities CEO, Arshia Sarkhani, as chief marketing officer; and ASST chief marketing officer, Logan Beirne, as chief legal officer.

Strive is also adding current Chief Financial Officer Ben Pham to its board, alongside Beirne, Sarkhani, and three new independent board members: Swan Bitcoin Chief Investment Officer Ben Werkman; MSTR True North founder Jeff Walton, and former Bain Capital hedge fund manager Avik Roy.

For every dollar of Bitcoin invested in the combined company as part of its planned $1 billion raise, the company will issue $1 of equity, diluting its current owners' stakes proportionally to their current level of investment.

* RIAs can also use Section 351 to reallocate portfolios without incurring tax, and ETF issuers can use it to seed new funds.

* Once the reverse merger closes, Strive will file a new S-3 registration document to expand Asset Entities' shelf capacity, so that it can issue up to $1 billion of new shares and debt.

* A hurdle rate is the minimum level of expected return on an investment needed before an investor will back a project, where the riskier the project, the higher the bar.