Strategy and bitcoin-buying firms face wider exclusion from stock indexes

By Elizabeth Howcroft

PARIS, Dec 19 (Reuters) - Michael Saylor's Strategy could soon beryllium dropped from MSCI and perchance different large banal indexes, which analysts accidental could outgo the bitcoin-hoarding elephantine up to $9 cardinal successful request for its shares and wounded the wider entreaty of the sector.

After queries ​from clients, MSCI successful October projected ditching from its planetary benchmarks companies whose integer plus holdings correspond 50% oregon much of their full assets. ‌It says they lucifer concern funds, which it does not see successful its benchmarks. But galore specified firms reason that they are operational companies processing caller products, and that MSCI's proposals unfairly discriminate ‌against crypto.

Shares successful Strategy, which began beingness arsenic bundle steadfast MicroStrategy, skyrocketed 3,000% aft it began buying bitcoin successful 2020, though they person since fallen sharply, and are down astir 43% this twelvemonth amid the cryptocurrency's slump.

Dozens much companies person been inspired to bargain and clasp crypto tokens connected their ain equilibrium sheets successful the hopes they volition summation value, though questions are increasing implicit the sustainability of these businesses.

MSCI is holding a nationalist consultation and volition denote a determination by January 15. Analysts accidental that if it ⁠excludes integer plus treasury (DAT) companies, different scale providers could follow.

"The ‌conversation already extends beyond conscionable MSCI... to the eligibility of DATs successful equity indexes successful general," Kaasha Saini, caput of scale strategy astatine Jefferies, told Reuters, adding that she expects astir equity indexes would determination to travel MSCI.

STRATEGY: EXCLUSION COULD "CHILL" INDUSTRY

Passive plus managers ‍are estimated to clasp arsenic overmuch arsenic 30% of a large-cap company's escaped float, according to Saini, meaning exclusion could trigger important outflows. That's particularly problematic for the DAT industry, since galore companies money their token purchases by selling stock.

A spokesperson for Strategy, which has progressively taken connected indebtedness to money its token purchases, did not respond to a petition for ​comment. Saylor this period dismissed worries implicit imaginable MSCI exclusion, telling Reuters it wouldn't matter.

But successful a consequent nationalist missive to MSCI, helium and Strategy CEO ‌Phong Le estimated DAT exclusion would effect successful $2.8 cardinal of its banal being liquidated and "chill" the industry.

The connection would unopen DATs retired of the astir $15 trillion passive-investment universe, "drastically weakening their competitory position", they wrote.

Analysts astatine TD Cowen estimated successful November that $2.5 cardinal of Strategy's marketplace worth comes from MSCI, and $5.5 cardinal from different indexes. JPMorgan estimated that Strategy faces $2.8 cardinal of outflows if MSCI kicks the institution out, rising to $8.8 cardinal if it is excluded from different indexes, which see the Nasdaq 100, CRSP US Total Market Index and assorted LSEG-owned Russell indexes.