Strategy, formerly known as MicroStrategy, has made major inroads into the crypto market with its bold transformation into a Bitcoin (BTC) treasury, a move that has yielded substantial unrealized gains over the past year.
Michael Saylor’s approach has positioned the enterprise software firm as a potential candidate for inclusion in the S&P 500, an index of the 500 largest publicly traded companies in the United States.
Michael Saylor’s Firm Eyes S&P 500 Inclusion
According to a Bloomberg report, the company’s $14 billion unrealized gain last quarter has theoretically fulfilled the profitability requirements necessary for entry into this index.
Although the path to inclusion remains challenging, Bloomberg reports that, if accepted, passive investment funds tracking the index would be required to purchase approximately 50 million shares of the company. This would result in an estimated $16 billion influx at current market prices.
However, the report notes that the process of gaining entry into the S&P 500 is far from automatic. The index committee evaluates various factors, including liquidity, profitability, and trading history, while also applying subjective judgment concerning sector balance.
Companies must meet specific criteria, such as a minimum market capitalization of $22.7 billion and demonstrate positive income over the most recent and past four quarters. As of this writing, Saylor’s firm has a market cap of over $90 billion.
The technology sector currently dominates the S&P 500, but the recent inclusion of Coinbase Global and Block, founded by Jack Dorsey, indicates a growing recognition of digital assets in mainstream finance.
Melissa Roberts, managing director at Stephens, noted that Coinbase’s entry signifies the committee’s intention to bolster representation from leading companies in emerging sectors. “If someone is a big player in the space, it’s hard to ignore them,” she remarked.
Concerns Ahead For Strategy
Despite the optimism surrounding Strategy’s candidacy, skepticism persists regarding the sustainability of Saylor’s corporate-treasury model.
This model involves raising capital through debt and equity to acquire and hold Bitcoin. In August, shares of Strategy fell by 17%, indicating a potential erosion of the premium the firm previously enjoyed over its Bitcoin assets.
Moreover, the volatility of Strategy’s stock, MSTR, with 30-day price fluctuations reaching 96% according to Bloomberg data, surpasses even notable tech giants like Nvidia and Tesla. The report highlights that this volatility could raise red flags for the index committee.
Even though Strategy was included in the Nasdaq 100 last December, the S&P 500 represents a much larger stage, managing nearly double the assets, with close to $10 trillion tied to passive investment strategies. Saylor has previously hinted that 2025 could be a pivotal year for S&P 500 inclusion.
Featured image from DALL-E, chart from TradingView.com
Related Posts
