MicroStrategy's Potential Exclusion From Nasdaq 100 Amid Bitcoin Focus
According to Odaily, MicroStrategy Inc., led by Michael Saylor, meets all the criteria for inclusion in the Nasdaq 100 Index. However, market analysts suggest that the company might be excluded during the index's annual adjustment on Friday. This speculation arises because MicroStrategy has transformed into a leveraged Bitcoin investment rather than a traditional software company, leading many to question its eligibility for the Nasdaq's top 100 stocks.
Lance Vitanza, an analyst at TD Cowen, remarked that the index is intended to accurately represent all significant companies in the stock market, and any major company on the Nasdaq should be included. Despite this, he maintains a "buy" rating for MicroStrategy. The company currently holds over $40 billion worth of Bitcoin, following the cryptocurrency's recent record highs. However, its core business reported a net loss of $340 million in the third quarter of this year. MicroStrategy's market capitalization of $98 billion, which ranks it around the 40th largest stock in the Nasdaq 100, is largely driven by its Bitcoin acquisition strategy. This focus on Bitcoin could influence its inclusion in the index.
Vitanza noted that Nasdaq might exclude MicroStrategy due to its smaller operational business size. Yet, he added that such a decision would be counterintuitive given the company's substantial market value. Michael Lebowitz, a portfolio manager at RIA Advisors, compared MicroStrategy to a commodity or ETF, asserting that without Bitcoin, the company is essentially defunct. He suggested that it should be reclassified as a financial company next year, as its value is entirely tied to Bitcoin. Lebowitz stated, "The vast majority of the company is just its Bitcoin holdings and the financial intrigue surrounding it, making it a financial company."
Vitanza also mentioned that if MicroStrategy were included in the index, the increase in stock trading volume might not significantly impact its liquidity but could attract new investors. Joining the broader U.S. benchmark index, the S&P 500, presents a different challenge, as it considers the profitability of new entrants. This could be a hurdle for MicroStrategy, which has reported net losses in three of the past four quarters. Vitanza concluded, "The fact that they are not a traditional operating company in the conventional sense has a much greater impact on the S&P 500 than on the Nasdaq 100."