The MSCI index provider has proposed changing the rules for including companies in its global indexes. The new requirements may lead to the exclusion of organizations that primarily accumulate investment assets instead of conducting a classic operating business. Companies such as Strategy, Metaplanet and other corporate holders of digital assets are under threat. This decision will potentially affect passive investment flows in their shares. No final decision has been made yet: the market will send feedback by September 30, 2017, and the results of the consultations will be made public by October sixteenth. If approved, the changes will take effect during the November revision of the indexes. Earlier this year, the provider had already refused to exclude such companies, but announced its intention to reconsider its approach to non-operational business.

As part of the analysis of the MSCI ACWI IMI index, the company identified three potential candidates for exclusion: Strategy, Yellow Cake and Metaplanet. Three more organizations may be added to the new public watch list. An additional safeguard mechanism is proposed for the active components of the index: a company must fail to meet the criteria for two consecutive annual periods before being excluded. One period is enough for new applicants. The assessment methodology consists of two stages. First, a basic filter is applied, according to which operating assets should account for more than fifty percent of total assets. If the company does not pass this threshold, an additional exclusion screen with five financial indicators is used.

An organization will be considered unsuitable for inclusion in the index if at least four of the five criteria are met. These include: the share of operating assets of less than twenty percent, operating expenses of less than five percent of assets, negative operating cash flow, a high proportion of non-operational changes in fair value, and a strong dependence on raising capital to accumulate assets. It is the last point that is key for companies issuing shares to buy cryptocurrencies. Previously, JPMorgan analysts estimated that Strategy's possible exclusion alone could cause an outflow of up to eight billion eight hundred million dollars. Supporters of cryptocurrencies talked about a potential outflow of ten to fifteen billion dollars in the event of a broader exclusion of such companies from global indexes.

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The material has been prepared solely for informational purposes and does not constitute financial advice or recommendation.