Strategy, led by Michael Saylor, is at risk of being excluded from major benchmark indices such as the MSCI USA Index and the Nasdaq 100.
Analyst Nikolaos Panigirtzoglou from JPMorgan warned in a recent report that Strategy could lose its place in these indices. The report noted:
While active managers are not obligated to follow index changes, removal from major indices would undoubtedly be perceived as a negative signal by market participants.
According to the report, if MSCI decides to exclude Strategy, this alone could trigger up to $2.8 billion in outflows. If other index providers follow suit, the scale of capital flight could expand further. Currently, passive fund exposure linked to the company stands at nearly $9 billion.
On October 10, MSCI stated in a declaration that some market participants had pointed out that digital asset treasury companies may resemble investment funds, which typically do not qualify for index inclusion.
As a result, MSCI proposed excluding companies with digital asset holdings accounting for 50% or more of total assets from its global investable market indices. A final decision on index inclusion is expected by January 15.
For a company that rose by packaging crypto exposure into stock tickers, exclusion from indices would deal a blow beyond liquidity. It would significantly erode the institutional credibility that once attracted mainstream portfolios and mark a reversal of its growth momentum.
On Thursday, Strategy’s stock fell over 5%, bringing its total decline to more than 60% since its record high in November last year. The premium of its market cap over its bitcoin holdings has nearly vanished. Bitcoin also plunged over 7% from its daily high, hitting a seven-month low.
**Business Model Under Scrutiny**
Strategy’s rise was built on a flywheel effect: issuing shares, buying bitcoin, benefiting from price surges, and repeating the cycle.
At its peak, the company’s market cap far exceeded the value of its holdings. But now, that premium has largely disappeared, with its valuation barely above its crypto reserves—a sign of rapidly waning investor confidence.
Despite this, the stock has still surged over 1,300% since Saylor announced its first bitcoin purchase in August 2020, outperforming all major stock indices.
Just a few months ago in September, crypto optimists were betting that Strategy might soon join the S&P 500, as its market cap, profitability, and trading liquidity were seen as meeting eligibility thresholds.
The company still holds nearly 65,000 bitcoins and continues issuing preferred shares to increase its holdings. However, the market is no longer rewarding narratives alone.
The ratio of the company’s enterprise value to its bitcoin holdings (mNAV) recently collapsed to around 0.95x—the first time in its history that its market cap fell below its bitcoin holdings.
**Funding Pressures Highlight Vulnerability**
The sell-off has also impacted Strategy’s newer financing instruments.
Prices of its perpetual preferred shares have dropped sharply, with the yield on its 10.5% coupon preferred shares issued in March climbing to 11.5%. A rare euro-denominated preferred share offering launched earlier this month fell below its already discounted issue price in less than two weeks.
Michael Youngworth, Global Head of Convertible Bond Strategy at Bank of America Global Research, commented:
"The premium has collapsed in recent weeks. That makes financing somewhat challenging."
These funding pressures underscore how much Strategy’s business model relies on confidence—and how quickly that confidence can unravel.
Strategy helped define the "digital asset reserve" model, but this business approach is now revealing its limitations. Peer companies are selling tokens to maintain liquidity or taking on more debt to delay a reckoning. What was once seen as institutional adoption now appears more like a mechanically fragile structure.
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