MSCI to Drop Strategy From Global Indexes After Nov. 30 Close, Putting Up to $2.8 Billion of Passive Selling in Play
MSCI will remove Strategy, the largest corporate bitcoin holder, from its global indexes, including the MSCI USA Index, effective after the close on November 30. JPMorgan analysts estimate about $2.8 billion of passive selling could follow, which matters to US investors holding index funds that track MSCI benchmarks and to anyone following the stock and its bitcoin-linked model.
Index provider MSCI said it will take Strategy out of its global indexes after deciding the company looks more like an investment fund than an operating business, according to a Reuters report published on Wednesday, November 11. Index operator MSCI will remove Michael Saylor's Strategy and other companies from its global indexes after determining they more closely resemble investment funds, a move that could curb passive investment flows into the stocks.
The rule behind the decision
MSCI's change follows a longer review. MSCI last year proposed to exclude digital asset treasury companies whose holdings represent 50% or more of their total assets and then launched a broader review into what it called "non-operating companies". Under the new methodology, a company is screened on its operating assets and then tested against financial ratios. Issuers that fail that core screen face five financial ratios, and a company flagged on four or more of them is ineligible for the MSCI Global Investable Market Indexes.
According to investingLive, Strategy did not get a warning period before the decision. It went straight onto the deletion list, which means it had already used up the buffer that existing members normally receive.
Timing and index exposure
The removal takes effect at a set date. Based on MSCI's November index review, Strategy will leave the MSCI USA Index and the broader MSCI World and ACWI indexes after the close of November 30. Official additions and deletions lists show Strategy (MSTR) out of its USA Index, which also takes it out of the broader MSCI World and ACWI indexes.
Strategy has disclosed how much of its stock sits in tracking funds. According to investingLive, Strategy says trackers hold about 13 million shares, or 3.1% of its basic shares, which the company argues is a modest share of its float.
Estimated selling pressure
JPMorgan analysts have put a number on the potential outflows. JPMorgan analysts have estimated that excluding Strategy could lead to approximately $2.8 billion in passive outflows from its shares. investingLive noted that this figure was calculated for MSCI's earlier crypto-specific proposal, not the broader rule that was adopted, so it may not capture the final outcome.
Index funds that must match benchmarks would be the sellers. Index inclusion matters to companies such as Strategy because passive funds and other investors tracking benchmarks are required to hold their shares.
What the company and others said
Strategy has pushed back on the decision. Executive chairman Michael Saylor has called the rule discriminatory and argues Strategy runs a genuine software business. The company has also said the impact will be limited. Strategy has argued the impact will be modest.
Removal does not force the company to change its holdings. A removal does not delist Strategy's stock, and nothing in the rules forces the company to sell bitcoin.
Shares were already moving lower. Reuters reported that Strategy's shares fell 0.8% in extended trading on Wednesday.
Wider read-through
The decision also affects other companies on the list. Strategy (MSTR) will be removed from the MSCI Global Standard Indexes series, including the MSCI USA Index, with the change effective at the close on Nov. 30. Japan's Metaplanet is also affected, with the index provider also removing Metaplanet from its global small-cap indexes, effective at the end of this month.
For US investors, the most direct exposure is through broad index funds and ETFs that track MSCI's USA and global benchmarks, along with the bitcoin-treasury segment of the market. The company did not say how it plans to fund future bitcoin purchases if its passive shareholder base shrinks, and the outcome of the November 30 close remains to be seen.
Sources
- MSCI to drop Strategy from global indexes, putting billions in fund inflows at risk By Reuters investing.com
- Strategy (MSTR) is to be removed from MSCI Global Investable Market Indexes following MSCI's implementation of a new non-operating company rule. investinglive.com
- MSCI Removes Strategy (MSTR) From Its Index bitcoinmagazine.com
- MSCI set to announce whether Strategy and Metaplanet stay in its global indexes cryptobriefing.com
- Strategy faces removal from MSCI indexes under new rules By Investing.com investing.com
- MSCI to Remove Strategy From Its Global Standard Indexes, Effective After Nov. 30 Close panews.io
Written with AI assistance on Nov 11, 7:01 PM ET from the reports listed under Sources, and reviewed by our editor after publication. Before it was published, every figure was checked against those reports, and passages with figures that could not be found there were left out. It can still contain mistakes: read the sources before acting on anything. How we review. Not investment advice.