TBW - Towards Strategy's exclusion from the MSCI stock market indices?
Michael Saylor has no intention of deviating from his course. While Strategy, his company that has become the global emblem of "Bitcoin Treasury Companies", could be excluded from the MSCI indices (around 10% market share), the boss insists that nothing, neither threats of massive capital withdrawals nor regulatory pressure, will change the group's long-term strategy.
The matter gained momentum this week. In an open consultation, index provider MSCI proposed removing "digital asset treasury companies" from several of its flagship indices. This category refers to companies whose majority of assets are cryptocurrencies.
The reason: these companies would "exhibit characteristics similar to investment funds", a type of entity that, under MSCI rules, cannot be included.
Verdict expected on 15 January. And the consequences could be severe.
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Up to $2.8bn in passive exits
According to a JP Morgan note, Strategy could face $2.8bn in exits if MSCI goes through with its proposal. In total, around $9 billion of its market capitalisation would be tied up in index and passive funds that replicate MSCI indices or the Nasdaq-100, of which Strategy has been a member since December 2024.
The issue is not just the withdrawal of capital: an exclusion would also reduce trading volume and the stock's liquidity, making it less attractive to large institutional investors. A potentially vicious circle for a group that has built part of its reputation on its stock market exposure.
Strategy shares are already down around 40% since the start of the year, driven by a fall in bitcoin and more volatile sentiment around Bitcoin corporates.
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Saylor: "We are neither an index fund nor a passive instrument"
Interviewed by the Wall Street Journal, Michael Saylor nonetheless shows no signs of inflection. In an email relayed by the US daily, he defends Strategy's status as an "operating company".
He points out that the group is not just about its massive reserves of BTC: Strategy still has an enterprise software division estimated at $500m, which has been active for more than twenty years and serves institutional and government clients.
"Strategy is not an ETF, nor a closed-end fund, nor an instrument that passively replicates bitcoin. We create, operate and grow just like any other business."
And most importantly: "Inclusion or exclusion from an index does not change our strategy, our business or our belief that bitcoin is superior capital."
Clearly: even if MSCI were to strike, the line won't budge.
A symbolic battle over "Bitcoin companies"
Beyond the Strategy case, this methodological revision by MSCI raises a broader question: how should the markets treat listed companies whose business model is based on holding bitcoins as cash?
These hybrid companies, part operational part asset managers, do not fit into any traditional framework. Their rise to prominence is now forcing the major index providers to clarify the rules of the game.
MSCI's response could be a milestone. And it will say a lot about how Wall Street intends to integrate, or not, companies whose balance sheets are built around an asset that traditional finance is still struggling to categorise.
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