MSCI to Decide on Exclusion of Strategy from Indices on November 11

On November 11, MSCI will announce the final changes to the index compositions, which may exclude Strategy from global benchmarks; the new rules will take effect after the close on November 30. The list of potential exclusions includes five stocks: Strategy, Metaplanet, Yellow Cake, Icelandic Skel Fjarfestingafelag, and Upexi. This is significant for Strategy as the company regularly sells new shares to finance bitcoin purchases: from October 12 to 18, it raised about $22 million from the sale of common shares and spent $22.1 million on BTC. As of October 25, the company holds 848,517 BTC.

How MSCI will evaluate

A company passes the initial filter if operating assets constitute at least 50% of all assets. Below the threshold, five financial tests are applied: operating asset intensity, expense intensity, operating cash flow, fair value intensity, and reliance on external financing. To be excluded, a company must fail at least four. Existing participants must fail the tests in both of the last reporting periods, while new ones must fail in at least one. The thresholds vary: for operating asset intensity – 10% for existing and 20% for new, for expense intensity – 5% for both groups, for fair value intensity – 75% and 50%, for financing reliance – 30% and 20%.

Strategy's position

Strategy is requesting MSCI to withdraw the rules, arguing that the provider has repackaged a previous proposal against companies with digital assets. According to the company, the classifications of operating and non-operating do not exist in US GAAP and IFRS, and it reports its bitcoin business as an operating segment in accordance with discussions with the SEC. Exclusion from the index will not require the sale of bitcoin but may remove benchmark-linked buyers. Strategy estimates the position of index funds at 13 million shares, or 3.1% of the base capital and about 60% of the 30-day average trading volume, and considers the effect limited.