MicroStrategy’s Market Cap Under Threat: JPMorgan Warns of Potential Index Exclusion
Analysts at JPMorgan are warning that MicroStrategy, a leading Bitcoin treasury firm, risks losing a significant portion of its market cap if it is excluded from major indices. The company’s market cap could take a hit of over 20% if MSCI, a prominent index provider, removes it from its benchmarks, including the MSCI USA and MSCI World.
The potential exclusion is due to MSCI’s consideration of a proposal to exclude crypto treasury firms from its benchmark indices. This proposal would apply to companies where crypto represents 50% or more of their total assets. If implemented, MicroStrategy could lose $2.8 billion, and potentially up to $8.8 billion if other indices follow suit.
Why Index Inclusion Matters
Index inclusion is crucial for companies like MicroStrategy, as it allows them to attract capital from passive investors who track these benchmarks. Exclusion from these indices could lead to a significant decline in the company’s stock price. MicroStrategy is currently included in the Nasdaq 100 and the S&P 600, but its exclusion from the S&P 500, the most widely followed benchmark index, has been a setback.
According to JPMorgan analyst Nikolaos Panigirtzoglou, the potential exclusion from MSCI indices could have a significant impact on MicroStrategy’s market cap. The company’s stock has already taken a hit in recent weeks, dipping to a one-year low before rebounding slightly.
MicroStrategy’s CEO Remains Confident
Despite the potential risks, MicroStrategy’s CEO, Michael Saylor, remains confident in the company’s prospects. He argues that Bitcoin’s volatility is a natural part of its growth and that the company is engineered to withstand significant drawdowns. Saylor also pointed out that institutional interest in Bitcoin remains strong, citing recent investments from Canada’s CPP pension fund and Florida’s pension fund.
Saylor also revealed that MicroStrategy has continued to buy Bitcoin, with a recent purchase of 8,178 BTC worth $835 million. The company now holds 649,870 BTC, valued at approximately $59.5 billion. With an average cost basis of $74,443, MicroStrategy remains comfortably in the green.
Conclusion
In conclusion, MicroStrategy’s potential exclusion from major indices poses a significant risk to its market cap. However, the company’s CEO remains confident in its prospects, citing strong institutional interest and the company’s ability to withstand volatility. As the decision on MSCI’s proposal approaches, investors will be watching closely to see how this develops. For more information, visit the original source: https://crypto.news/strategy-risks-bloodbath-if-major-index-ditches-it-jpmorgan/
