MicroStrategy Bid for S&P 500 Inclusion

MicroStrategy is striving for an inclusion in the S&P 500 index which will potentially lead to a broader BTC exposure in investment portfolios.

One of the most significant corporate holders of Bitcoin, MicroStrategy is gradually making progress toward being eligible for inclusion on the S&P 500 index.

This significant milestone might result in Bitcoin companies being included in “nearly every portfolio.” Despite this, the Bitcoin-focused company would still be required to fulfill stringent qualifying requirements and obtain a significant increase in market capitalization.

Following an eight-day trading stretch that saw its stock price rise by 46%, MicroStrategy climbed up to the 535th position among the biggest publicly-listed firms in the United States on February 15. This happened after the company’s stock price had increased by 46%.

A company must meet several eligibility requirements to be included in the S&P 500 index, which is a tracking index that follows the top 500 largest companies that are listed on US stock exchanges in the United States.

These requirements include a minimum market cap requirement and a positive sum of profits over the previous four quarters and the company must also have been profitable in the most recent quarter.

It is also required that at least 250,000 shares have been traded over the past six months, and members of the general public must hold the majority of the shares.

The present regulations stipulate that for a company to be qualified, it must have a market value of $15.8 billion. Considering that MicroStrategy’s market capitalization is currently at $12.1 billion, the present price of $718 would need to increase to $937 if all other factors remain the same.

The stock of MicroStrategy, on the other hand, has reported a positive sum of earnings over its most recent quarter as well as over its previous four quarters.

Even if all of the requirements are satisfied, the eleven-person executive committee of the S&P must still provide their approval for MicroStrategy’s listing. In May 2022, the committee decided to temporarily exclude electric car maker Tesla from the S&P 500 ESG index.

Every three months, on the third Friday of March, June, September and December the broad index fund undergoes a complete rebalancing. According to Joe Burnett, senior product marketing manager at Unchained, a Bitcoin financial services provider, if MicroStrategy is successful in its pursuit of an S&P 500 listing, it has the potential to “spark a massive positive feedback loop” of Bitcoin exposure in practically every exchange-traded fund portfolio.

As soon as MicroStrategy is listed in the S&P 500, Bitcoin will start “automatically infiltrating nearly every portfolio,” according to Burnett. This category includes your standard 401(k), your pension fund and your 60:40 portfolio are all included in this “this” category.

State Street’s SPDR S&P 500 ETF Trust, BlackRock’s iShares Core S&P 500 and the Vanguard S&P 500 ETF are the three exchange-traded funds that track the S&P 500 in terms of assets under management.

According to the ETF database maintained by VettaFi, each of these funds has more than $400 billion in assets under management. MicroStrategy’s portfolio weighting would represent around 0.01% of the S&P 500 index fund if the company were to achieve its goal of breaking into the S&P 500.

According to the data, the S&P 500 now has a market valuation of $41.9 trillion, which indicates that MicroStrategy would require a passive capital allocation of $12 billion if it were to be weighted at 0.01%. Stock markets are driven by passive index flows.

According to Burnett, who stated this in a separate post on X, “Inclusion would [equal] automatic buying, which would boost its share price, enable more equity issuance for Bitcoin buys, further lift its share price, and attract more passive flows.”

MicroStrategy currently possesses 190,000 Bitcoins, purchased at an average price of $31,224. This indicates that the company has made a profit of $3.9 billion on its investment.

It comes at a time when Michael Saylor, the founder and chairman of the company disclosed on February 9 that MicroStrategy is shifting from being a business intelligence organization to a “Bitcoin development firm.”