Strategy and Metaplanet could face MSCI index removal under new rules

Traders Union
All News
Crypto
Strategy and Metaplanet removal

MSCI expands review beyond crypto companies

The new rules are not aimed exclusively at companies that hold digital assets as treasury reserves. In January, MSCI decided against immediately excluding such companies and instead opted to develop a broader approach to businesses with limited operating activities.

Under the simulation, SharpLink, Center Laboratories and Lydia Holding would be placed on a public watchlist. Strategy was the largest company potentially facing exclusion, with a free-float-adjusted market capitalization of $23.9 billion.

JPMorgan analysts previously estimated that Strategy's removal from MSCI indexes could trigger approximately $2.8 billion in passive capital outflows. These would stem from funds that automatically structure their portfolios to track the composition of the indexes.

MSCI's proposal does not change the current index composition at this stage. The company is accepting market feedback until September 30 and plans to announce the results of the consultation by October 16.

Financial metrics determine eligibility

The proposed methodology involves a two-step assessment. MSCI would first determine whether a company's operating assets represent a sufficient share of its balance sheet. Companies that fail this stage would then be assessed against five additional financial metrics.

The criteria include operating asset intensity, operating expense intensity, cash flow from core operations, changes in the fair value of non-operating assets and dependence on raising capital.

A company could become ineligible for index inclusion if it fails the initial assessment and triggers negative results on at least four of the five additional criteria.

More lenient conditions would apply to companies already included in the indexes. An existing constituent would have to fail the requirements for two consecutive annual reporting periods before being removed. MSCI said the approach is designed to avoid frequent index changes caused by short-term fluctuations in financial metrics.

Amid the potential review of Strategy's status, the company has become more active in managing its reserves. On August 10, it reported selling another 1,690 BTC for approximately $108.6 million while continuing to build its cash reserves.

As a result, Strategy's cash reserve reached $4.65 billion, indicating a shift in the company's approach after a prolonged period focused primarily on accumulating Bitcoin.

Strategy also recently introduced its Bitcoin Credit Model for assessing risks within its capital structure. The tool is designed to track the company's ability to service its obligations under different Bitcoin price scenarios.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.