Michael Saylor’s company, formerly known as MicroStrategy, is highly vulnerable to the current cryptocurrency market downturn, which has erased over $1 trillion in total market value in the past month. As the largest public holder of Bitcoin with more than 650,000 coins, the firm now faces the serious risk of being dropped from major benchmark indices that have been key to its presence in mainstream investment portfolios.
According to a recent Bloomberg report, JPMorgan Chase analysts have warned that Saylor’s company could lose its place in important indices like MSCI USA and the Nasdaq 100. They predict this could lead to passive outflows of $2.8 billion to $8.8 billion if MSCI makes an expected decision by January 15. With passive funds tied to the company representing nearly $9 billion in market exposure, removal from these indices would be a significant setback.
The company’s strategy has involved a cycle of selling stock to buy Bitcoin, profiting from price increases, and repeating the process. At its peak, the firm’s market value was much higher than its Bitcoin holdings, but that premium has disappeared. Now, the company’s valuation closely matches its crypto reserves, signaling a rapid loss of investor confidence.
JPMorgan analysts, led by Nikolaos Panigirtzoglou, noted that while active managers aren’t required to follow index changes, being excluded from major indices would likely be seen as negative by the market. This could reduce liquidity, raise funding costs, and make the company less attractive to investors.
MSCI is considering new rules for index inclusion after feedback from stakeholders who view digital asset treasury firms as similar to investment funds, which are not eligible for indices. MSCI has proposed excluding companies with digital assets making up 50% or more of their total assets from its global investment market indexes.
Since its peak last November, Saylor’s company has seen its shares (MSTR) fall by over 60%, erasing the premium that once drew momentum and crypto-focused investors. Despite this drop, the company’s value is still up more than 1,300% since Saylor started buying Bitcoin in August 2020, outperforming major stock indices during that time.
The sell-off has also affected the company’s newer funding methods. Prices for its perpetual preferred shares, a key part of recent strategies, have dropped sharply. Yields on securities issued in March have increased to 11.5% from 10.5%, and a recent euro-denominated preferred stock offering has fallen below its discounted price in less than two weeks.
Michael Youngworth, head of global convertible bond strategy at Bank of America Global Research, commented that the premium has collapsed recently, making it harder for the company to raise capital.
Frequently Asked Questions
Of course Here is a list of FAQs about Saylors strategy and the potential loss of its index status designed to be clear and helpful for all levels of understanding
Beginner Definition Questions
1 What is Saylors strategy in simple terms
Saylors strategy is to buy and hold a massive amount of Bitcoin believing its value will rise significantly over the long term He uses his company MicroStrategy as a publiclytraded vehicle for this investment
2 What does index status mean
An index is a basket of stocks that tracks a specific part of the market Index status means a companys stock is included in one of these important baskets
3 Why is being in an index so important
When a stock is added to a major index huge investment funds are required to buy it This creates massive automatic and continuous demand for the stock
Core Issue Impact Questions
4 Why is Saylors index status in jeopardy
MicroStrategys primary business is no longer its original software focus its now Bitcoin investment Major index providers have rules that a companys main business must be clearly defined and a pure investment vehicle might not qualify
5 What would happen if MicroStrategy loses its index status
If its removed all those index funds would be forced to sell their MicroStrategy shares This would likely cause the stock price to fall significantly due to the sudden surge in selling pressure
6 What is the 8 billion thats at stake
This refers to the massive amount of money invested in MicroStrategy through these index funds If the stock is dropped and its price falls the value of those investments could plummet
7 How is this connected to the price of Bitcoin
MicroStrategys stock price is now tightly linked to Bitcoins price If MicroStrategys stock crashes due to being removed from an index it could create panic and negative sentiment potentially dragging down Bitcoins price as well
Advanced Strategic Questions
8 Isnt this a major flaw in Saylors strategy
Its a significant risk By tying his companys fate so closely to Bitcoin and index rules he has created a single point of failure If the