Potential Index Exclusion Looms Over Strategy Shares

Strategy US5949724083

A structural challenge far exceeding typical Bitcoin volatility now confronts Strategy. The company, formerly known as MicroStrategy before rebranding as a Bitcoin treasury firm, faces the prospect of a forced multi-billion dollar sell-off. This stems from a current review by index provider MSCI, which is considering excluding companies holding over 50% of their assets in digital currencies from its benchmarks.

The threat is immediate and quantifiable. Market analysts estimate that approximately $2.5 billion in demand for Strategy stock originates directly from funds tied to MSCI indices. An additional $5.5 billion could be at stake if other major indexes follow MSCI’s potential lead. In total, outflows reaching $8.8 billion are possible should the equity be removed from key benchmarks like the MSCI World Index or the Nasdaq 100.

Strategy unequivocally meets the proposed exclusion criteria. Its business model is entirely centered on cryptocurrency, with a treasury holding over 671,000 Bitcoin—valued at roughly $57 billion. A final decision from MSCI is anticipated in January.

Valuation Premium Evaporates Amid Continued Accumulation

The market’s reaction to management’s aggressive acquisition strategy has fundamentally shifted. The company purchased an additional 10,645 Bitcoin for about $980 million in the second week of December alone. However, the substantial valuation premium it once enjoyed has now collapsed.

The mNAV multiple—the ratio of market capitalization to net asset value—currently sits at or even below 1.0. This indicates the market prices the stock at barely more than the value of its pure Bitcoin holdings; the legacy software business and management’s strategic role are effectively assigned no value.

Heightened Volatility Expected

Shares gained around four percent on Friday, benefiting from a modest Bitcoin recovery to approximately $87,000. This does little to alter the overarching trend: Strategy has declined 52% since the start of the year and trades 64% below its 52-week high near $456.

Nervousness is likely to persist until MSCI’s January ruling. Investors are essentially betting on two opposing scenarios simultaneously: a Bitcoin rally that could propel the share price upward, or a forced exodus from major indices triggering waves of institutional selling.