MicroStrategy Faces Potential Exclusion from Key Stock Benchmarks

Strategy US5949724083

The year 2025 concluded at a fresh low for MicroStrategy. As the largest publicly-traded corporate holder of Bitcoin globally, the company witnessed its equity value decline by 51% during the fourth quarter. This precipitous drop has set the stage for a significant potential development: index provider MSCI may remove the firm from its global indices on January 15. The rationale cited is an excessive concentration of Bitcoin on the company's balance sheet.

MicroStrategy shares ended December 30 at $155.61, representing a 51% decline from their 2025 peak of approximately $457 reached in July. This performance positioned it as the weakest constituent within the Nasdaq-100 index for the year. For context, Bitcoin's own price fell by 21.7% over the same period.

A key metric, the ratio of market capitalization to net asset value (mNAV), has contracted sharply to 1.05. This figure stood above 2 throughout 2024 and early 2025. This compression has effectively halted MicroStrategy's capital strategy, as issuing new shares below net asset value would dilute existing shareholders.

Despite market pressures, the company's financial position remains solid. It holds $2.19 billion in cash reserves—sufficient to cover dividend payments for nearly 32 months. Debt from convertible notes totals $8.24 billion, with no maturities due before 2028. The loan-to-value ratio is 14%, rising to 27% when including preferred stock. Furthermore, on December 1, the firm established a formal USD reserve of $1.44 billion specifically to meet dividend and interest obligations without needing to sell Bitcoin.

The Looming Index Provider Decision

MSCI is considering a policy to exclude companies whose balance sheets contain more than 50% digital assets from its indices. The provider argues such entities resemble investment funds more than traditional operating businesses. For MicroStrategy, the consequences could be severe. Analysts at JPMorgan estimate passive fund outflows from MSCI-tracking funds alone could reach $2.8 billion. Should other major index providers enact similar rules, the total selling pressure could swell to as much as $9 billion.

Should investors sell immediately? Or is it worth buying Strategy?

In a formal statement last December, Executive Chairman Michael Saylor contested this characterization. He argued that MicroStrategy is not a fund or a trust vehicle, but an operational business with a $500 million software division and a distinctive treasury strategy.

Continued Bitcoin Accumulation Amid Turmoil

Undeterred by the sell-off, MicroStrategy continued its Bitcoin acquisition strategy between December 22 and 28, purchasing an additional 1,229 coins at an average price of $88,568 each. The purchase was funded by the sale of 663,450 of the company's own shares. Its total holdings now stand at 672,497 Bitcoin, acquired at an average cost of just under $75,000 per coin.

Analyst Sentiment Remains Surprisingly Bullish

Despite these challenges, the analyst community maintains a favorable view. The consensus rating is a "Strong Buy," with an average price target near $490—implying upside potential exceeding 200% from current levels. TD Cowen labeled the potential MSCI exclusion as "misguided" and "unfortunate," while Mizuho Securities reaffirmed its Outperform rating with a $484 price target.

The company is scheduled to release its Q4 2025 financial results in late January or early February. Until then, the market awaits to see whether January 15 marks the beginning of a recovery or the start of a new downward trajectory for the stock.