Strategy Could See $2.8B In Outflows If Indices Exclude MSTR
Strategy, the original “bitcoin-on-NASDAQ” proxy, is facing a significant structural risk as MSCI considers excluding companies with large digital-asset treasuries from traditional stock benchmarks. A recent JPMorgan research note highlights the impending decision on January 15, which could have major implications for Strategy.
Currently, Strategy sits at the extreme end of the category, with digital-asset holdings exceeding 50% of total assets. If MSCI decides to remove the company from major equity indices, analysts predict severe mechanical selling pressure, with potential outflows amounting to billions of dollars.
The warning comes at a vulnerable moment for Strategy, as its shares have declined more than bitcoin itself in recent months. The company’s once-lofty premium has collapsed, and its market cap hovers around $59 billion. With nearly $9 billion held in passive index-tracking vehicles, any exclusion from indices could have a significant impact.
The model that propelled Strategy’s rise — raise equity, buy bitcoin, benefit from reflexivity, repeat — is now facing structural challenges. The stock has dropped over 60% since last November’s high, and its perpetual preferred shares have sold off sharply.
Strategy’s inclusion in major benchmarks like the Nasdaq 100 and MSCI has been crucial for attracting institutional investors. However, MSCI’s recent consultation revealed concerns about digital-asset treasury companies being viewed more as investment funds than operating businesses, raising doubts about their eligibility for index inclusion.
The looming decision by MSCI could have far-reaching consequences for Strategy, potentially leading to reputational damage, wider funding spreads, and reduced trading activity. The company’s valuation has become increasingly tied to its underlying bitcoin holdings, with the risk of losing the reflexive premium that fueled its growth.
Despite the challenges, Michael Saylor, the CEO of Strategy, remains optimistic about the company’s future. He envisions building a trillion-dollar Bitcoin balance sheet and using it to reshape global finance. Saylor plans to issue Bitcoin-backed credit at higher yields than traditional fiat systems, creating new financial products and revitalizing credit markets.
As Strategy approaches the January 15 inflection point, investors are closely watching MSCI’s decision and its potential impact on the company’s future. The outcome could determine the trajectory of Strategy’s digital-asset treasury model and its role in the evolving landscape of global finance.
