Strategy chairman Michael Saylor confirmed the company is in discussions with MSCI ahead of a Jan. 15 deadline that could remove the world's largest corporate Bitcoin holder from major stock indices. The index provider is considering whether companies that primarily accumulate cryptocurrencies resemble investment funds, which are ineligible for inclusion, potentially triggering $8.8 billion in outflows from Strategy's stock according to JPMorgan estimates.
What Happened: Index Provider Reviews Bitcoin Accumulation Model
MSCI announced plans to decide by Jan. 15 whether to exclude companies whose business model centers on purchasing cryptocurrencies, citing concerns about their structural similarity to investment funds that currently cannot be included in its indices.
Strategy, which holds Bitcoin through a combination of stock sales and debt financing, currently maintains positions in the MSCI USA and MSCI World indices. These benchmark inclusions attract passive investment through exchange-traded funds, supporting both stock demand and valuation.
The company's shares have declined 37% this year, significantly outpacing Bitcoin's 0.6% annual loss and suggesting investor skepticism about its approach of selling equity and accumulating debt to expand cryptocurrency holdings.
Saylor told Reuters at a Binance event in Dubai that the company is "engaging in that process" with MSCI, though he disputed JPMorgan's outflow projections. "It won't make any difference, in my opinion," he said regarding potential index removal.
Strategy revised its full-year earnings forecast Monday, projecting losses of up to $5.5 billion compared to an expected $24 billion profit forecast just one month earlier. The revision follows Bitcoin's steepest monthly decline since mid-2021 in November. Saylor acknowledged the inherent volatility, noting that "the equity is going to be volatile, because the company is built on amplified bitcoin." He added that if Bitcoin drops 30% to 40%, the equity would fall further "because the equity is built to fall."
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Why It Matters: Treasury Model Faces Regulatory Pressure
The MSCI review threatens a corporate treasury model that has spawned imitators across public markets, with Strategy's approach inspiring other publicly traded firms to stockpile digital assets as a path to cryptocurrency exposure through traditional equities. JPMorgan analysts warned in a recent note that exclusion would raise questions about the company's future costs and capacity to raise both equity and debt capital.
Other index providers could follow MSCI's lead, compounding the financial impact.
Strategy operates with 1.11 times leverage and could withstand a 95% decline in Bitcoin's price, according to Saylor. However, the proposed MSCI criteria would exclude any company holding digital assets exceeding half of total assets.
The recent Bitcoin downturn could force similar companies to liquidate holdings, creating additional downward price pressure. Strategy shares rose 2.1% in premarket trading Wednesday as broader market sentiment showed modest improvement.
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