JPMorgan has warned that the MSCI ruling on January 15 may eject Strategy (MSTR) from major equity indices. The removal of Strategy from MSCI alone could drive nearly $2.8 billion in passive outflows, with a further $8.8 billion remaining at risk if other index providers follow suit. JPMorgan analysts, led by Nikolaos Panigirtzoglou, noted that Strategy has embedded its presence in major benchmarks. They also claimed that the company’s inclusion on the Nasdaq 100, MSCI World, and MSCI USA has allowed Bitcoin to seep indirectly into institutional and individual portfolios. However, this could reverse if MSCI ejects Strategy and other crypto firms relying on digital assets as their primary treasury holdings. For perspective, approximately $9 billion out of the company’s $59 billion market capitalization is invested in passive vehicles, ETFs, and mutual funds that track these global indices. Meanwhile, the JPMorgan analysts argue that losing major index status would negatively impact Strategy’s reputation. It could also reduce liquidity and make the stock less appealing to large institutional clients, raising doubts about its ability to raise equity. The rumors alone have seen Strategy’s total market value fall to pandemic levels. Strategy misses cut for S&P 500 admission Michael Saylor’s Strategy missed the cut for admission into the S&P 500, while Robinhood Markets, AppLovin, and Emcor were added. The company was excluded because it apparently looks more like an exchange-traded fund (ETF) or closed-end fund than a company with recurring revenue and profits. Benchmark analyst Mark Palmer said the company probably did not make the cut because of earnings volatility. However, being a bull on the company’s stock, Palmer believes Strategy will eventually make it into the S&P 500. He pointed out that the index committee may want to see another quarter or two of clean earnings before adding Strategy. Another reason why Strategy will not be added soon is that S&P Dow Jones Indices considers it a software company in its Global Industry Classification Standard (GICS). The appears to suggest that Strategy was a software company before transitioning into a Bitcoin Treasury about five years ago. Meanwhile, Strategy Chairman and controlling shareholder Michael Saylor said he was not expecting the company to be included in the index so soon. He noted that Strategy is a new concept that is slowly making believers every quarter, adding that this trend is expected to continue for the foreseeable future. Strategy is now more of a financial company, given that its Bitcoin holdings dominate its current business. The company holds over 638K BTC, worth roughly $72 billion, which represents approximately 3% of the total outstanding supply. It is the largest Bitcoin treasury in the world with a market value of $94 billion. MSCI adds 69 securities and slashes 64 from MSCI ACWI Index The MSCI recently announced the addition of 69 securities and the deletion of about 64 securities from the MSCI ACWI Index. The index provider revealed that the three largest additions to the MSCI World Index measured by full market capitalization will be Nebius Group A (Netherlands), CoreWeave (USA), and Insmed (USA). Meanwhile, GF Securities Co., Ltd. (China), Barito Renewable Energy (Indonesia), and Zijin Gold International (China) will join the MSCI Emerging Markets Index, also measured by full company market capitalization. There will also be 207 additions to and 224 deletions from the MSCI ACWI Small Cap Index. On the other hand, the MSCI ACWI Investable Market Index (IMI) will have 199 additions and 211 deletions. About 175 securities will be added to the MSCI World All Cap Index, and 71 will be deleted. The MSCI further disclosed eight additions to and two deletions from the MSCI Frontier Markets Index. The three largest additions to this index include Meezan Bank (Pakistan), Vietnam Airlines JSC (Vietnam), and Bank Al Etihad (Jordan). There will also be 29 additions and nine deletions from the MSCI Frontier Markets Small Cap Index. Sharpen your strategy with mentorship + daily ideas - 30 days free access to our trading program
