MSCI will remove Strategy, the largest corporate holder of Bitcoin, from its MSCI USA Index at the close of November 30. The index provider confirmed the cut in its November review filing on Wednesday, setting up a forced exit for passive fund money.
Index funds do not choose their stocks. When a company leaves an index, tracking funds must sell. JPMorgan analysts estimated last year that removal could push about $2.8 billion of Strategy shares out of these funds. That figure was based on MSCI’s earlier proposal, not the final rule.
Why MSCI cut Strategy
MSCI adopted a new test on October 15. Companies without substantial operating assets now count as “non-operating” and lose eligibility for its global indexes.
Strategy, formerly MicroStrategy, still runs a software business. But its balance sheet is dominated by 850,364 Bitcoin, bought for $64.16 billion, according to its latest SEC filing.
Japan’s Metaplanet, another Bitcoin treasury firm, was also marked for deletion on MSCI’s October draft list.
Market reaction
Strategy shares closed at $122.35 on Wednesday, up 1.06%. They slipped 0.85% to $121.31 in after-hours trading as the list landed.
Strategy has argued the rule does not hurt its business.
“While not material to $MSTR, the proposal is misguided, flawed, and conflicts with established securities laws and accounting principles,” the company said.
What happens next
The real test comes on November 30, when tracking funds must trade. JPMorgan estimated a further $8.8 billion could leave if other index providers follow MSCI.
Bitcoin treasury companies sold Wall Street on one idea: stock-market access to Bitcoin. Under MSCI’s rule, that model no longer counts as an operating business.
“MSCI should be a mirror of the market, not an arbiter of it,” said Michael Saylor, founder and chair of MicroStrategy.
