Tonight, shortly after 5 p.m. ET, index provider MSCI will publish its November index review, and the crypto world will be watching one name above all others: Strategy. The company that turned itself into the largest corporate holder of bitcoin expects to be kicked out of MSCI's global stock indexes, which would force the index funds tracking those benchmarks to sell their Strategy shares before the market closes on November 30. JPMorgan analysts have estimated the forced selling could reach about $2.8 billion. Strategy itself puts the number lower, at around $1.57 billion, but either way tonight is the night the bitcoin treasury era gets its first real verdict from traditional finance.
The $2.8 billion question
Here is how the money works. MSCI's indexes are the benchmarks that trillions of dollars in passive funds track, so when a stock leaves an index, every fund that mirrors that index has to sell it. Strategy disclosed in its third-quarter report that it expects its Class A common stock to be excluded, and the company says index funds hold about 13 million of its shares, or 3.1 percent of the shares outstanding, worth roughly $1.57 billion. JPMorgan analysts have put the upper end of the forced selling higher, at about $2.8 billion, with as much as $8.8 billion more if other index providers follow MSCI's lead. The selling would not hit all at once, since funds have until the close on November 30 to rebalance, but traders have already started pricing it in, with MSTR closing at $121.07, down 3.6 percent on the day and about 6.4 percent below its November 5 close of $129.30.
Why MSCI thinks Strategy is not a real company
MSCI's new rule does not mention bitcoin at all. Under the screening rule finalized on October 15, a company first has to show that its operating assets make up more than half of its total assets, and if it fails that test it faces five financial ratio checks covering operating expenses, cash flow, fair value exposure and dependence on outside financing. A company flagged on four or more of those tests is classed as a non-operating company and loses its place in the MSCI Global Investable Market Indexes, and a company already in the indexes only gets removed if it fails the screen in both of its two most recent annual filing periods. MSCI's preliminary list names five companies for deletion, with Strategy, Japan's Metaplanet and Solana treasury firm Upexi as the three crypto names, alongside uranium holder Yellow Cake and an Icelandic investment firm. Another 17 companies sit on a watchlist, including SharpLink, so this is a ruling on the whole playbook of raising money in the stock market to buy crypto, not just one company. Strategy has fought the rule in public, with executive chairman Michael Saylor and chief executive Phong Le calling it discriminatory, arbitrary and misguided in a September letter. The company argues it still runs a software business and reports its bitcoin treasury as an operating segment. MSCI says the screen is industry neutral and applies to any company that looks more like an investment vehicle than an operating business.
An Example of Why Some Bitcoin Traders Have Never Been Strategy Fans
Their argument basically says; we are now in a position where Bitcoin's value (not all, but still too much) depends on what happens to a single company. When the company began buying billions in Bitcoin under direction of then-CEO Michael Saylor, he quickly became a hero in the crypto world - which was never deserved,
So what could happen to Strategy stock later today, and how much of that could spill over in to Bitcoin? What it would not do: it would not delist Strategy shares, and it would not force Strategy to sell a single bitcoin, since the selling pressure falls on MSTR stock, not on the 850,364 bitcoin the company holds. But the second-order effect is the big factor, because Strategy's whole machine runs on its stock trading at a premium to the value of the bitcoin it holds. That premium is what lets the company sell new shares at high prices or issue low-interest convertible bonds and funnel the cash straight into more bitcoin, building a stack bought for an average of $75,456 per coin at a total cost of about $64.16 billion. Bitcoin was trading near $73,900 on Wednesday, below Strategy's average purchase price, yet the company still bought another 1,036 bitcoin for $81.9 million in the week ending November 8. If tonight's decision dents the premium, every future share sale raises less money and dilutes existing holders more, which makes the next round of bitcoin buying harder to fund. Strategy says removal would have no meaningful impact on its business, and that may turn out to be true, but tonight is the first real test of that claim, and every company that copied the bitcoin treasury playbook will be watching the same list.
So tonight at 5 p.m. ET, check the list. If Strategy is on it, expect a wave of mechanical selling into November 30 and a hard question for every treasury company that followed Saylor's lead. If it survives, it lands on the watchlist and the same fight comes back at the next review. Either way, the era when passive index money flowed into bitcoin treasury stocks without anyone asking what those companies actually do is ending.
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Author: Rowan Marrow
Seattle Newsroom
GlobalCryptoPress | Breaking Crypto News
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