Strategy blasts MSCI exclusion plan as 845,050-bitcoin treasury faces test

Strategy, holding 845,050 bitcoins worth $65.8 billion, has opposed MSCI's plan to strip it from global indexes as discriminatory and flawed.

"MSCI's continued effort to discriminate against digital assets is misguided and calls into question MSCI's neutrality and reliability," Strategy wrote in a letter to MSCI signed by founder Michael Saylor and Chief Executive Officer Phong Le.

MSCI's August consultation proposes a quantitative screen based on five financial metrics — operating asset intensity, expense intensity, cash flow, fair value intensity and capital dependence. A company would be removed if it fails the core operating-assets screen and four of five additional tests. Applying the methodology as of May would have removed Strategy, Japan's Metaplanet and uranium investor Yellow Cake, MSCI said.

MSCI is seeking feedback through the end of September and plans to announce results in October. Removal from major benchmarks can shrink the pool of investors required to own the stock, potentially reducing demand and adding strain to the financing model behind Strategy's more than $60 billion in Bitcoin purchases.

The proposal revives a threat that appeared to have receded earlier this year, when MSCI withdrew a plan targeting companies whose digital-asset holdings represent 50 percent or more of total assets. Instead of a rule aimed at Bitcoin, the latest consultation asks a broader question: what qualifies as an operating company for inclusion in an equity benchmark.

"Index providers should measure markets, not decide which assets companies are allowed to own," Strategy said in a social media post. "MSCI's proposal puts it out of step with regulators, markets, and its own customers."

Strategy argues it is an operating business, employing 1,500 people globally and reporting its Bitcoin holdings as an operating segment with gains and losses booked as operating expenses. The company said MSCI's methodology for targeting non-operating companies is "arbitrary and unexplained" and unfairly targets digital asset treasuries.

A precedent beyond Strategy

The consultation extends an existing principle — investment vehicles such as exchange-traded funds and business development companies are already excluded from MSCI's investable indexes — to corporations that resemble them economically, said Edward Yoon, index strategist at Macquarie Capital.

"Our conclusion: this debate may ultimately be more important as a precedent for Bitcoin treasury companies and other asset-centric public-company structures than as a near-term flow event for MSTR itself," said Lance Vitanza of TD Securities.

Removal from major benchmarks can create a short-term technical overhang on shares and reduce investor visibility, said Melissa Roberts, managing director of index rebalancing research at Stephens Inc. MSCI is considering watchlists, buffer thresholds and a requirement that companies fail the screens for two consecutive review periods before removal, which Yoon said gives issuers and investors time to assess the impact.

Strategy shares have jumped more than 35 percent in the past week as Bitcoin climbed back above $80,000, offering relief after a prolonged slide. The stock is still down roughly 60 percent over the past year and 15 percent year-to-date.

This article is for informational purposes only and does not constitute investment advice.