A company has 848,000 bitcoins sitting on its balance sheet, worth nearly $70 billion. The index provider says it doesn’t look like a company.
On October 15, MSCI announced that it had formally adopted a new set of rules. Companies classified as having “non-operating businesses” will no longer be eligible for the MSCI Global Investable Market Indexes.
The rules take effect in the November index review and will be applied after market close on November 30. The final list will be announced on November 11.
To be clear, the provisions do not target cryptocurrencies specifically. MSCI has framed them as a general company screening rule. First, it looks at whether a company has substantial operating assets. Those that don’t pass then face five financial-ratio tests; if they are flagged on four or more, they are disqualified.
The August consultation document named names. Strategy, Japan’s Metaplanet, and Upexi appeared on a simulated list, while SharpLink, Ton Strategy Company, Solana Company, and DeFi Development were placed on a watchlist.
These companies have one thing in common: their identity. Strategy hoards Bitcoin, SharpLink hoards Ethereum, and Solana Company hoards SOL. They all follow the same playbook: issue shares, debt, or preferred stock, then use the proceeds to buy crypto. Strategy pioneered this approach, and more than a hundred companies around the world have copied it over the past two years.
Last October, MSCI imposed temporary restrictions on this type of company, targeting issuers with digital assets accounting for more than half of total assets and freezing increases to their share counts and inclusion factors. The new rules replace that temporary measure with a broader filter, expanding the scope from crypto companies to any company that looks like an investment vehicle.
Strategy’s response was understated. It calculated that funds tracking MSCI indexes hold around 13 million of its shares, or 3.1% of its basic shares outstanding—less than a day’s trading volume. In a letter last September, it wrote that the proposal would have no material impact on its business, but would seriously damage MSCI’s reputation as a neutral index provider.
The market was less calm. After the news broke, Strategy briefly fell nearly 4% in after-hours trading.
My view is that the real change is happening at the level of definition. MSCI first decides that a company’s core assets must be operational, and only then looks at its financial ratios. Once that definition is established, the valuation foundation for every company built on issuing shares to stockpile crypto shifts.
The old foundation was a premium. When a company’s share price is higher than the value of the crypto it holds, it can use its shares to buy more crypto. Rising crypto prices then push the share price higher, creating a positive feedback loop. That loop depends on people continuing to buy the company’s shares, and index funds are among the steadiest buyers. They don’t care about the story; they care about the weighting, and they invest money every week. MSCI is cutting off that route, effectively removing the part of the loop that requires the least effort.
Last year, JPMorgan estimated that if Strategy were excluded, it could trigger around $2.8 billion in selling pressure. That figure relates to an earlier, crypto-specific MSCI proposal and is not the same as the new rules adopted on October 15. If other index providers follow suit, the total could rise to $8.8 billion, also based on last year’s estimate.
I’m not sure what the final list in November will look like. The August simulation used data from May this year, and MSCI has yet to confirm whether those names will appear again. The rules also include a buffer: existing constituents must fail the test in both of their most recent annual reporting periods before being removed. Strategy has two years to change how its financial statements look.
Crypto treasury companies have been making the same pitch for years: they turn assets that ordinary investors can’t access into a stock that can be bought through a brokerage account. Now the index rules ask a simple question: are you actually a company, or just a box holding crypto?
$BTC $ETH $SOL #币安广场 #MSCI #Strategy #比特币储备 #index funds
On October 15, MSCI announced that it had formally adopted a new set of rules. Companies classified as having “non-operating businesses” will no longer be eligible for the MSCI Global Investable Market Indexes.
The rules take effect in the November index review and will be applied after market close on November 30. The final list will be announced on November 11.
To be clear, the provisions do not target cryptocurrencies specifically. MSCI has framed them as a general company screening rule. First, it looks at whether a company has substantial operating assets. Those that don’t pass then face five financial-ratio tests; if they are flagged on four or more, they are disqualified.
The August consultation document named names. Strategy, Japan’s Metaplanet, and Upexi appeared on a simulated list, while SharpLink, Ton Strategy Company, Solana Company, and DeFi Development were placed on a watchlist.
These companies have one thing in common: their identity. Strategy hoards Bitcoin, SharpLink hoards Ethereum, and Solana Company hoards SOL. They all follow the same playbook: issue shares, debt, or preferred stock, then use the proceeds to buy crypto. Strategy pioneered this approach, and more than a hundred companies around the world have copied it over the past two years.
Last October, MSCI imposed temporary restrictions on this type of company, targeting issuers with digital assets accounting for more than half of total assets and freezing increases to their share counts and inclusion factors. The new rules replace that temporary measure with a broader filter, expanding the scope from crypto companies to any company that looks like an investment vehicle.
Strategy’s response was understated. It calculated that funds tracking MSCI indexes hold around 13 million of its shares, or 3.1% of its basic shares outstanding—less than a day’s trading volume. In a letter last September, it wrote that the proposal would have no material impact on its business, but would seriously damage MSCI’s reputation as a neutral index provider.
The market was less calm. After the news broke, Strategy briefly fell nearly 4% in after-hours trading.
My view is that the real change is happening at the level of definition. MSCI first decides that a company’s core assets must be operational, and only then looks at its financial ratios. Once that definition is established, the valuation foundation for every company built on issuing shares to stockpile crypto shifts.
The old foundation was a premium. When a company’s share price is higher than the value of the crypto it holds, it can use its shares to buy more crypto. Rising crypto prices then push the share price higher, creating a positive feedback loop. That loop depends on people continuing to buy the company’s shares, and index funds are among the steadiest buyers. They don’t care about the story; they care about the weighting, and they invest money every week. MSCI is cutting off that route, effectively removing the part of the loop that requires the least effort.
Last year, JPMorgan estimated that if Strategy were excluded, it could trigger around $2.8 billion in selling pressure. That figure relates to an earlier, crypto-specific MSCI proposal and is not the same as the new rules adopted on October 15. If other index providers follow suit, the total could rise to $8.8 billion, also based on last year’s estimate.
I’m not sure what the final list in November will look like. The August simulation used data from May this year, and MSCI has yet to confirm whether those names will appear again. The rules also include a buffer: existing constituents must fail the test in both of their most recent annual reporting periods before being removed. Strategy has two years to change how its financial statements look.
Crypto treasury companies have been making the same pitch for years: they turn assets that ordinary investors can’t access into a stock that can be bought through a brokerage account. Now the index rules ask a simple question: are you actually a company, or just a box holding crypto?
$BTC $ETH $SOL #币安广场 #MSCI #Strategy #比特币储备 #index funds