MSCI’s Strategy exclusion could complicate future Bitcoin buying

MSCI said on November 11 that its November review had finalized the companies affected by its revised rules for non-operating companies. Strategy, Japan’s Metaplanet and UK-based uranium investor Yellow Cake are among those set to leave the indexes, Reuters reported.

JPMorgan previously estimated that Strategy’s exclusion could prompt $2.8 billion in outflows, rising to $8.8 billion if other major index providers adopt similar restrictions. Strategy estimated that funds tracking relevant MSCI indexes held about 13 million MSTR shares, or 3.1% of its basic shares outstanding. Those holdings were worth about $1.57 billion at Tuesday’s closing price. Strategy shares fell about 2.5% in extended trading after Wednesday’s announcement, according to Reuters.

The revised methodology assesses whether companies have substantial operating assets before applying five financial-ratio tests. A company that fails the initial assessment and triggers at least four tests becomes ineligible. Existing index members must fail the screening in their two most recent annual filing periods before removal. The new framework replaces temporary restrictions on companies with digital-asset holdings equal to at least 50% of total assets.

The direct selling risk is in Strategy shares, but the company regularly issues common and preferred stock to fund Bitcoin purchases. Its latest acquisition was 1,036 BTC for $81.9 million between November 2 and November 8, bringing its holdings to 850,364 BTC. It financed that purchase and a separate $188.3 million repurchase of STRC preferred shares through common-stock sales. In September, Strategy paused Bitcoin buying for two weeks while spending $139.3 million on preferred-share repurchases.

Bitcoin is also facing weaker demand elsewhere. It has struggled to recover above $75,000 as US spot Bitcoin ETFs recorded about $1.28 billion in net withdrawals in the first week of November and another $201 million on November 9. A Bitfinex analysis dated October 30 said 180 publicly listed companies held about 1.3 million BTC, with Strategy accounting for nearly two-thirds. The analysis questioned whether demand for preferred shares could weaken the financing available for future corporate Bitcoin buying.