Strategy, a publicly traded Bitcoin treasury company, faces potential removal from Morgan Stanley Capital International (MSCI) global indexes following new eligibility rules announced on October 15.
MSCI established financial tests that deem non-operating companies ineligible for indexing. The new criteria identify non-operating firms as those whose primary value, income, or business activities stem from passive financial investments rather than traditional commercial operations.
MSCI's Three Core Indicators
MSCI outlined three factors that define non-operating status:
- Asset misalignment: The vast majority of a company's valuation is tied to passive assets such as Bitcoin or treasuries, rather than operational income
- Revenue disconnect: The company's income and cash flow are dictated by the valuation of underlying assets rather than core operational activities
- Capital allocation mode: The company issues new debt or equity to acquire more passive assets rather than investing in research, development, and business expansion
Companies are removed from indexes if they fail financial and operational tests across two consecutive review periods.
Projected Financial Impact
JPMorgan estimates that Strategy's removal from MSCI indexes could trigger $2.8 billion in liquidations. The projection is based on analysis of passive funds tracking the MSCI USA Index and MSCI World Index, which hold approximately 13 million shares of Strategy, representing 3.1% of basic shares outstanding.
If competing index providers such as FTSE Russell or S&P Dow Jones implement similar measures, potential outflows could range between $8.8 billion and $11.6 billion.
Timeline and Next Steps
MSCI will publish the official list of affected companies on November 11, with the new eligibility rules taking effect following the November 30 market close.
Strategy has contested the potential delisting as unfair. The company continues to accumulate Bitcoin, with its most recent purchase bringing its holdings to 848,250 BTC.
