MicroStrategy, a prominent Bitcoin (BTC) corporate holder, is on the brink of eligibility for inclusion in the S&P 500 index, a move that could revolutionize portfolio compositions across the investment landscape. The company’s recent market performance and its strategic focus on Bitcoin position it as a contender for this significant milestone.
Market performance and eligibility criteria
In recent trading sessions, MicroStrategy (MSTR) has surged, securing the 535th position among the largest publicly listed companies in the United States. This eight-day rally, amounting to a 46% increase, underscores the company’s momentum toward meeting the stringent criteria for S&P 500 inclusion.
To be eligible for the S&P 500, a firm must meet specific requirements, including a minimum market capitalization, profitability over the preceding four quarters, and significant public ownership.
Currently, candidates must boast a market cap of $15.8 billion, a threshold that MicroStrategy is approaching with its current market cap of $12.1 billion. Should its market cap align with the criteria, MicroStrategy’s stock price would need to rise to $937 to fulfill the eligibility requirements.
MicroStrategy has demonstrated profitability over the past four quarters, further solidifying its candidacy for S&P 500 inclusion. However, approval by the index’s executive committee remains a crucial step in the process, with a precedent set by the temporary removal of Tesla from the S&P 500 ESG index in May 2022.
Implications for portfolio diversity
If MicroStrategy successfully secures a spot on the S&P 500, it could catalyze a significant shift in portfolio dynamics, particularly within exchange-traded funds (ETFs). Joe Burnett, Senior Product Marketing Manager at Bitcoin financial services firm Unchained, highlights the potential for a “massive positive feedback loop” of Bitcoin exposure across various investment portfolios.
Including the platform in the S&P 500 would automatically integrate Bitcoin exposure in numerous portfolios, including traditional 401k plans, pension funds, and diversified investment portfolios. This development would be especially impactful considering that the three largest ETFs by assets under management closely track the S&P 500, collectively managing over $400 billion each.
The Company’s potential portfolio weighting within the S&P 500 would be approximately 0.01%, translating to a significant allocation of passive capital towards Bitcoin. With the S&P 500 boasting a market cap of $41.9 trillion, MicroStrategy’s inclusion could allocate $12 billion in passive capital towards Bitcoin-related investments.
MicroStrategy’s strategic shift
MicroStrategy’s journey towards potential S&P 500 inclusion aligns with its broader strategic shift under the leadership of founder and chairman Michael Saylor. In a recent revelation, Saylor announced the company’s transition from a business intelligence firm to a “Bitcoin development firm,” signaling a definitive pivot towards cryptocurrency-centric endeavors.
The company’s substantial Bitcoin holdings, totaling 190,000 BTC acquired at an average purchase price of $31,224, underscoring its commitment to cryptocurrency as a core component of its business strategy. With MicroStrategy’s evolving focus on Bitcoin, its potential inclusion in the S&P 500 could mark a pivotal moment for the company and the broader investment landscape.
As investors anticipate the platform’s next moves and the potential ramifications of its S&P 500 inclusion, the convergence of traditional finance and cryptocurrency markets appears to be accelerating, reshaping investment strategies and portfolio compositions for the future.
