Strategy gains eligibility for the S&P 500 index
MicroStrategy, the American business intelligence company known for its significant Bitcoin holdings, is in the running for potential inclusion in the S&P 500. If successful, this move could have a significant impact on the cryptocurrency market and the company's financial standing.
Currently, MicroStrategy holds Bitcoin worth over $64 billion, making it the largest corporate holder of the cryptocurrency. This year alone, the company has purchased over 150,000 Bitcoin, contributing significantly to Bitcoin's price development. The company's market capitalization, currently over $110 billion, has kept it large enough for inclusion in the S&P 500 for 334 consecutive trading days.
The S&P Dow Jones Indices committee will decide on MicroStrategy's potential inclusion on September 5. However, the company's inclusion is not guaranteed. The S&P 500, which represents the 500 leading U.S. companies weighted by market capitalization, requires companies to meet several criteria to be eligible. These include having corporate headquarters in the USA, listing on a U.S. exchange, at least 50% of shares freely tradable, sufficient liquidity of the stock, net profit in the last quarter, and net profit average over the last four quarters.
If MicroStrategy is included in the S&P 500, it would become the fourth company in the index to hold Bitcoin on its balance sheet, following in the footsteps of fellow tech giants like Tesla and Nvidia. The company's inclusion could result in capital inflows of around $4 billion from ETFs, further boosting its Bitcoin purchases.
Moreover, if included, MicroStrategy would have a weight of approximately 0.2% in the S&P 500. This could lead to a rising stock price, making issuing new shares for Bitcoin purchases increasingly lucrative. The company is expected to report official Q2 figures on July 31, with predictions of a profit of approximately $11 billion, making it one of the most profitable companies globally.
The chances of MicroStrategy being included in the S&P 500 seem not too bad, especially since it is now one of the largest and most profitable U.S. companies. Just a few weeks ago, the large crypto exchange Coinbase was announced to be part of the S&P 500, setting a precedent for other major players in the cryptocurrency industry.
However, it's important to note that the value appreciation of Bitcoin was not visible on the balance sheet under generally accepted accounting principles (GAAP) before the switch to "Fair Value Accounting". Approximately $21.5 billion of MicroStrategy's Bitcoin holdings are unrealized investment gains, highlighting the potential volatility in the company's financials due to Bitcoin's price fluctuations.
In conclusion, the potential inclusion of MicroStrategy in the S&P 500 could mark a significant milestone for the cryptocurrency industry and the company itself. The decision by the S&P Dow Jones Indices committee on September 5 will be closely watched by investors and industry observers alike.
