Strategy and Bitcoin-Holding Firms Face Broader Exclusion from Stock Indexes

Michael Saylor’s Strategy (MSTR.O) could soon be removed from MSCI benchmarks and potentially other major stock indexes, a move analysts warn could reduce demand for the bitcoin-holding firm’s shares by up to $9 billion and dampen interest in the wider digital asset sector.

In October, MSCI proposed excluding companies whose digital asset holdings make up 50% or more of total assets from its global indexes, classifying them as investment funds, which the benchmarks typically do not include. Many firms, however, argue they are operational businesses developing innovative products and that the proposal unfairly singles out crypto-focused companies.

Strategy, which originally started as software firm MicroStrategy, saw its shares soar roughly 3,000% after beginning its bitcoin purchases in 2020. They have since declined sharply, down about 43% this year amid the broader cryptocurrency slump. Inspired by Strategy, dozens of other companies have added crypto tokens to their balance sheets, though concerns about the long-term viability of such businesses are growing.

MSCI is conducting a public consultation and plans to announce a decision by January 15. Analysts suggest that if MSCI excludes digital asset treasury (DAT) companies, other index providers could follow suit.

“The conversation extends beyond just MSCI to the broader eligibility of DATs in equity indexes,” Kaasha Saini, head of index strategy at Jefferies, told Reuters. She anticipates most major indexes will align with MSCI’s approach.

Passive asset managers often hold up to 30% of a large-cap company’s free float, meaning exclusion could trigger substantial outflows. This is especially significant for DAT companies, which often fund crypto purchases by selling stock. While Strategy’s team has not commented publicly, Saylor downplayed the potential impact, telling Reuters it would not be consequential.

However, in a public letter to MSCI, Saylor and CEO Phong Le estimated that exclusion could force $2.8 billion of Strategy’s stock to be sold, potentially “chilling” the broader industry. The move could cut DATs out of the $15 trillion passive-investment universe, weakening their competitive position. Analysts at TD Cowen estimate $2.5 billion of Strategy’s market value derives from MSCI inclusion, with $5.5 billion linked to other indexes. JPMorgan projects $2.8 billion in outflows if excluded from MSCI, rising to $8.8 billion if other indexes follow. Strategy’s market capitalization stood at approximately $45 billion as of Thursday.

Beyond Strategy, MSCI’s preliminary list includes 38 companies with a combined market cap of $46.7 billion, such as French bitcoin investor Capital B (ALCPB.PA). Companies like Strive (ASST.O) note that market pricing has largely factored in these proposals, though over the long term, the cost of capital for bitcoin treasury companies could rise.