MicroStrategy Criticizes Morgan Stanley’s Index Proposal as “Discriminatory”

MicroStrategy has expressed strong opposition to Morgan Stanley Capital International’s (MSCI) plan to exclude companies heavily invested in Bitcoin from major equity indices, claiming that this measure inaccurately categorizes them as investment funds.

Key Takeaways

MicroStrategy opposes MSCI's plan to exclude Bitcoin-focused companies from major equity indices, arguing it misclassifies them.
The proposed 50% digital asset threshold is seen as discriminatory against certain sectors while ignoring others.
JPMorgan estimates that MicroStrategy could face billions in forced selling if excluded from the index.
The consultation will inform how Bitcoin treasury companies are classified in the investment ecosystem, affecting liquidity and capital costs.
MSCI’s decision is pending, with industry stakeholders watching closely until December 31.

This statement follows JPMorgan's warnings that the proposed action could lead to billions in forced sales, positioning MicroStrategy at the heart of a significant discussion on the management of Bitcoin exposure in public markets.

MicroStrategy's Position on the Proposal

MicroStrategy, now known as Strategy, officially responded on Wednesday, asserting that MSCI’s plan fundamentally misunderstood the operational model of companies that are heavily invested in Bitcoin.

In a detailed 12-page letter penned by Executive Chairman Michael Saylor and President Phong Le, Strategy emphasized that it operates as a business that leverages its Bitcoin assets to issue credit instruments and raise capital. They argued that this operational approach is significantly different from a passive investment vehicle that merely tracks a single asset.

“The index standards must be neutral, consistent, and reflective of the evolving global market,” the firm stated, adding, "We implore MSCI to dismiss the proposal. It rests on an extensive misrepresentation of Digital Asset Treasuries (DATs) and would impose unreasonable conditions that could stifle innovation, harm the reputation of MSCI’s indices, and conflict with national objectives."

Additionally, Strategy criticized the proposed 50% digital asset threshold as discriminatory, claiming that it unfairly targeted them while leaving similarly concentrated sectors, such as oil and real estate, untouched.

Potential Risks from the Consultation

The dispute arose in October when MSCI initiated a consultation regarding the classification of digital asset treasuries (DATs) within its index methodology. The introduction of the 50% threshold immediately placed Strategy and other Bitcoin-oriented companies under scrutiny.

Strategy clarified, "We are not a fund, not a trust, and not a holding company. We are a publicly traded operating company managing a $500 million software business with a unique treasury strategy that utilizes Bitcoin as productive capital."

In November, a JPMorgan analysis projected that if MSCI were to remove Strategy from its indices, it could face approximately $2.8 billion in forced selling. If other providers were to adopt similar measures, the total could skyrocket to $8–9 billion.

These forecasts heightened public unease and spurred renewed discussions about the classification of Bitcoin treasury companies within the index framework.

For Strategy, the stakes go beyond mere index eligibility. Being excluded could diminish liquidity and increase the company’s capital costs. Furthermore, it might limit the role of corporate treasuries in providing a pathway for investors looking for indirect Bitcoin exposure.

Broader implications for investors were evident, as this situation raised essential questions about whether Bitcoin exposure should primarily be managed through regulated exchange-traded funds or remain integrated into publicly traded companies that maintain digital assets on their balance sheets.

The consultation by MSCI remains ongoing, with a closing date set for December 31. Market participants are closely monitoring developments as the index provider deliberates its final decision.