Strategy (MSTR) Stock: Bitcoin Treasury Giant Fights Back Against Index Exclusion

TLDR

• Strategy submitted a 12-page letter pushing back against MSCI’s proposed rule that would exclude companies with over 50% crypto holdings from stock indexes
• The company argues the 50% threshold would create “whiplash” and inconsistent treatment due to different accounting rules between IFRS and U.S. GAAP
• Strategy claims MSCI includes other single-asset businesses like REITs and oil companies, making the crypto exclusion unfair
• JPMorgan estimates Strategy could face $2.8 billion to $8.8 billion in passive outflows if removed from indexes
• MSCI’s final decision is expected by January 15, 2025, ahead of February’s index rebalancing

Strategy fired back at index giant MSCI this week over a proposed policy change that could kick bitcoin treasury companies out of major stock indexes. The company submitted a lengthy response arguing the move would hurt investors and clash with U.S. government policy.

MicroStrategy Incorporated, MSTR

The dispute centers on MSCI’s plan to exclude companies whose balance sheets hold more than 50% in digital assets. Strategy, which holds 660,624 BTC worth around $61 billion, would be the biggest company affected by the change.

MSCI announced the review in October. The index provider argues that bitcoin treasury firms act more like investment funds than operating companies. Strategy and other critics say that’s wrong.

In its 12-page letter sent Wednesday, Strategy made several arguments against the exclusion. The company said digital asset treasury firms are operating businesses that actively manage their holdings. Strategy pointed to its Bitcoin-backed credit instruments as proof of operational activities.

The letter highlighted an accounting problem with the 50% rule. Companies reporting under IFRS can keep bitcoin at cost on their books. U.S. companies using GAAP must mark holdings to fair value each quarter.

This means two identical businesses could be treated differently based only on where they report. Strategy warned this would cause companies to “whipsaw on and off” indexes as bitcoin prices move. The result would be chaos for index providers and investors.

Other Single-Asset Companies Stay in Indexes

Strategy also questioned why MSCI includes other businesses focused on single assets. Real estate investment trusts hold primarily real estate. Oil companies focus on petroleum. Media companies own content portfolios.

The company wrote that many financial institutions hold specific asset types and create derivatives from them. Residential mortgage-backed securities work this way. Yet these businesses remain in MSCI indexes.

The bitcoin treasury company framed the proposal as working against U.S. policy goals. Strategy cited President Trump’s initiatives promoting digital asset development. These include the Strategic Bitcoin Reserve and expanded 401(k) access to crypto.

The letter argued that blocking bitcoin treasury firms would lock them out of roughly $15 trillion in passive investment capital. This would “stifle innovation” and hurt U.S. efforts to lead in crypto adoption.

Potential Impact on Strategy Stock

JPMorgan analysts ran numbers on what removal would mean. They estimated Strategy could see about $2.8 billion in passive outflows if dropped from indexes. That figure could climb to $8.8 billion if other index providers follow MSCI’s lead.

Strategy stock has dropped over 50% in the past year. Bitcoin itself fell 15% from its early 2025 price above $109,000 to current levels around $90,000. The underlying asset actually beat the stock wrapper’s performance.

MSCI raised concerns about volatility and correlation risks. Companies heavy in crypto could make indexes more volatile. Index performance might start mirroring crypto market swings instead of broader equity markets.

Federal Reserve research backs up these worries. Bitcoin and Ether show much higher volatility than stock indexes, oil, or gold. The Fed noted that crypto traders commonly use leverage, which makes price swings even bigger.

Other bitcoin treasury companies joined the pushback. Strive told MSCI last week the 50% threshold creates problems. The firm suggested MSCI could offer optional versions of indexes that exclude digital asset treasury companies for clients who want that.

MSCI plans to announce its final decision by January 15, 2025. Any changes would take effect during the February index rebalancing.

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