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JPMorgan states that MicroStrategy’s stock has already factored in the risk of being excluded from major equity benchmarks.

 

The upcoming MSCI decision could serve as a potential upside catalyst, even though a removal would still trigger passive outflows.

MicroStrategy, the largest corporate holder of Bitcoin, was already facing challenges because of declining Bitcoin prices. With approximately $60 billion in cryptocurrency and limited cash reserves, concerns about selling off MicroStrategy’s digital asset holdings have increased, adding to the selling pressure in a fragile crypto market characterized by thin liquidity and muted demand.

JPMorgan previously estimated that up to $2.8 billion could leave the market if index-tracking funds are compelled to divest. However, the bank believes that most of the negative impact has already been reflected in the stock price. Following a sharp selloff, MicroStrategy shares dropped around 20% after the report and are currently trading near the value of the company’s Bitcoin holdings.

In a note, analysts led by Nikolaos Panigirtzoglou commented, “In our opinion, a decision to remove MicroStrategy from MSCI indices would have limited downside for both MicroStrategy and Bitcoin, as this potential index exclusion has already been more than priced in.” They also noted that if the MSCI’s decision on January 15 is favorable, both MicroStrategy and Bitcoin could see a significant rebound to their levels before October 10.

 

A proposed rule targeting companies with digital asset holdings exceeding 50 percent of total assets may result in MicroStrategy, formerly known as Strategy, being removed from indices such as MSCI USA. The decision is expected by January 15. MicroStrategy has raised tens of billions of dollars through both equity and fixed-income securities. Co-founder Michael Saylor began purchasing Bitcoin in 2020 as a hedge against inflation. However, with stock prices and cryptocurrency values plunging, liquidity concerns have intensified, making it increasingly difficult for MicroStrategy to raise additional capital.