Strategy Survives Its First Nasdaq 100 Shakeup Since Joining the Index

Strategy has successfully maintained its position in the Nasdaq 100 during the recent rebalancing, marking its first significant trial since being added to the index in December of the previous year.

Key Takeaways

Strategy, formerly known as MicroStrategy, is the largest corporate holder of Bitcoin with around 660,624 BTC valued at nearly $60 billion.
The latest Nasdaq 100 rebalancing resulted in the removal of several companies while introducing new ones.
Despite staying in the Nasdaq 100, Strategy's stock has declined over the past month.
MSCI is considering new classification rules that could impact Strategy, potentially forcing significant sell-offs of its shares.
The company has successfully raised $1.44 billion to address market concerns about its financial obligations in a downturn.

Strategy survives first Nasdaq 100 shakeup since entering the index

Strategy's Remarkable Bitcoin Holdings

Strategy, which previously operated under the name MicroStrategy, has positioned itself as the largest corporate holder of Bitcoin. Recently, the company purchased an additional 10,624 Bitcoin for approximately $962.7 million, bringing its total holdings to 660,624 BTC. The total value of these holdings is nearly $60 billion.

During the recent Nasdaq 100 rebalancing, several companies, including Biogen, CDW, GlobalFoundries, Lululemon, On Semiconductor, and Trade Desk, were removed from the tech-centric index. Meanwhile, new entrants included Alnylam Pharmaceuticals, Ferrovial, Insmed, Monolithic Power Systems, Seagate, and Western Digital, as reported by Reuters.

Despite maintaining its place in the index, shares of Strategy fell by 3.74% on the rebalancing day, continuing a declining trend that has seen shares decrease by over 15% in the past month.

Strategy shares down 15% over the past month. Source: Google Finance

MSCI Review Poses Challenges for Strategy

The inclusion of Strategy in the Nasdaq 100 raises questions due to its unconventional business model, particularly as debates intensify about whether companies like Strategy operate like conventional businesses or simply as investment vehicles.

This year, MSCI began reviewing how to categorize firms that primarily use capital to acquire digital assets. They are contemplating excluding companies with crypto holdings exceeding 50% of their total assets, a decision that could adversely affect Strategy starting in January. JPMorgan has warned that this could force passive funds holding as much as $2.8 billion in Strategy shares to sell.

In response, Strategy's leadership has expressed strong opposition. In a letter to MSCI dated December 10, Executive Chairman Michael Saylor and CEO Phong Le maintained that Strategy is not merely a passive Bitcoin accumulator but an active enterprise that issues various financial instruments to fund new acquisitions.

Strategy Raises $1.4 Billion to Address Market Fears

In a recent move to alleviate market apprehensions about its capability to fulfill dividend and debt obligations amidst fluctuating share prices, Strategy raised $1.44 billion. CEO Phong Le stated, “There was FUD that was put out there that we wouldn’t be able to meet our dividend obligations, which causes people to pile into a short Bitcoin bet.”

During the Bitcoin MENA event in Abu Dhabi, Saylor shared that he has been in discussions with sovereign wealth funds, bankers, and family offices to position Bitcoin as "digital capital" and "digital gold." He emphasized the potential for a new category of "digital credit" built on Bitcoin that could generate yield without the asset’s typical volatility, aiming to attract institutional investments into the crypto sphere.