MSCI announced that it will determine today whether MicroStrategy Inc. (MSTR) stays in its indexes. If the stock is removed, passive funds that track MSCI indexes may need to sell between 13 million and 23.1 million shares, representing roughly $1.57 billion to $2.8 billion, by 30 November.
MSCI’s New Screening Criteria
On 15 October, MSCI introduced a screening process for companies that may operate more like investment vehicles than traditional businesses. The process first checks whether at least 50 % of a company’s total assets stem from regular business operations. Companies that fail this test are then evaluated against five additional financial measures, and exclusion requires failure of at least four of those measures.
MicroStrategy’s Position
MicroStrategy reported total assets of $74 billion for the quarter, including $68.9 billion in Bitcoin holdings (approximately 848,517 BTC) and $5.1 billion in cash. Its software business represents a small portion of total assets, suggesting it may not meet the 50 % operating‑asset threshold.
Two of the five additional tests raise concerns:
- Large changes in asset value: Operating income of $20.9 billion was driven largely by a $20.9 billion gain in Bitcoin value as the price rose from $58,700 to $83,600.
- Reliance on external financing: The company continues to raise capital through stock and preferred‑share issuances to fund Bitcoin purchases and dividend payments.
MicroStrategy noted in its filing that, based on MSCI’s criteria, its Class A common stock could be excluded from the MSCI Global Investable Market Indexes.
Potential Market Impact
JPMorgan analysts estimate that MSCI removal alone could lead to $2.8 billion of passive‑fund selling. If other index providers adopt similar rules, total forced selling could rise to $8.8 billion.
Implications for Bitcoin Holdings
Removal from MSCI indexes would not require MicroStrategy to sell its Bitcoin. However, reduced access to equity financing could limit the company’s ability to purchase additional Bitcoin in the future.
