S&P 500’s Rejection of The Company Formerly Called MicroStrategy May Stop the Crypto-Acquisition Frenzy

The S&P 500’s refusal to include the company previously called MicroStrategy raises questions about the sustainability of the business model of corporate treasury investments in cryptocy. JPMorgan strategists led by Nikolaos Panigirtzoglou say the decision by S&P Dow Jones Indices last week not to promote the company that’s now called Strategy  into the S&P 500 index even though it meets size and other key requirements for inclusion, was an important one.

S&P Dow Jones Indices, as is its custom, did not comment on Strategy’s exclusion, and it did not respond to a question from MarketWatch. But it is notable that S&P also does not include closed-end funds and exchange-traded funds in the S&P 500.  Although Strategy isn’t technically an investment company, it fundamentally acts as one, as the lion’s share of its market capitalization is based on its holdings of bitcoin rather than on its underlying information-technology business.

“This is signaling that the committee, which can apply discretion in its index inclusion decisions, is concerned about including in the S&P 500 index companies such as MicroStrategy that are effectively bitcoin funds. This rejection is a blow to not only MicroStrategy but also other corporate crypto treasuries that have proliferated in recent months in an attempt to replicate MicroStrategy’s crypto accumulation model,” the strategists said.