Strategy (NASDAQ: MSTR) fell 6.46% to $141.5 on Oct. 16, according to market data from BIT (bit.com), as traders reacted to expectations around a proposed MSCI rule change. The new framework would screen out companies whose asset mix and operating profile look more like investment funds than traditional operating businesses, using tests tied to the share of operating assets and several financial ratios. Strategy, whose balance sheet has an unusually high concentration of Bitcoin, has been identified as a company that could be removed under review. The final list of affected names is expected on Nov. 11. Market participants say that if MSTR is dropped from MSCI-linked indexes, passive funds tracking those benchmarks may have to cut their holdings, creating potential selling pressure worth billions of dollars. Such an outcome could also challenge the company’s model of using equity financing to keep increasing its Bitcoin position.
Strategy (MSTR) extended its decline to 6.46% on Oct. 16, trading at $141.5, according to market data from BIT (bit.com).
The move came as the market focused on a proposed MSCI rule change. Under the new framework, MSCI would use the share of operating assets and several financial ratio tests to filter out companies whose asset structure and business characteristics are closer to investment funds than to traditional operating companies.
Strategy has been placed on the watchlist of companies that could be removed because of its very high Bitcoin asset concentration. The final list of affected companies is expected to be released on Nov. 11.
Market participants believe that if MSTR is removed from MSCI-related indexes, passive funds tracking those benchmarks could be forced to reduce their holdings, potentially creating selling pressure worth billions of dollars. That could also pose a challenge to Strategy’s model of continuing to add Bitcoin through equity financing.
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