MSCI announced Tuesday that it will not exclude bitcoin treasury companies from its global indices, at least for now.
The decision allows Strategy (NASDAQ:MSTR) to maintain its position in benchmark stock indices, while keeping the door open for other eligible bitcoin treasury companies.
Strategy shares rose 5.5% on Wednesday following the news.
Market participants previously expressed concerns that a delisting would lead to fire sales by passive index funds. JPMorgan analysts estimated Strategy could face roughly $2.8 billion in capital outflows if MSCI removed the stock from its stock indexes. Analysts projected another $8.8 billion of possible selling pressure if other index providers took similar steps.
Matt Hougan, chief investment officer at Bitwise, responded to these fears that led to the decision in a December 3 report. Hougan wrote that the impact of a possible delisting was likely already built-in and argued that there is “no plausible near-term mechanism that would force” Strategy to sell its bitcoin.
The strategy revealed a cash reserve of $2.19 billion as of December 21. This capital provides a buffer against volatility or unexpected operational needs.
MSCI stated that it would not implement the proposal to exclude digital asset treasury companies at this time, but the index provider acknowledged feedback from institutional investors who noted that some of these companies exhibit similar characteristics to investment funds. Current index rules generally exclude entities with primary investment-oriented rather than operational activities.
“MSCI intends to open a broader consultation on the treatment of non-operating companies generally. This broader review aims to ensure consistency and continued alignment with the overall objectives of the MSCI indices, which seek to measure the performance of operating companies and exclude entities whose core activities are investment-oriented in nature,” the announcement reads.
The organization intends to open a broader consultation on the treatment of non-operational companies. This review aims to distinguish between investment entities and companies that hold non-operating assets as part of their core operations. MSCI noted that assessing eligibility for these types of entities may require additional criteria based on financial statements.
Securities identified in MSCI’s preliminary list of companies with digital assets comprising 50% or more of total assets will see no change to their current treatment, and the index provider will not implement increases in the number of shares or inclusion factors for these securities.
Header image by Gage Skidmore via Wikimedia Commons