MSTR Falls Nearly 10%; Index List Still Undecided
Over the first two trading days next week, I expect rallies in U.S.-listed MSTR to remain vulnerable to selling pressure. MSCI’s new rules have been approved, but it has yet to make a final decision on whether Strategy will be removed from its indexes. Friday’s drop was sharp, yet the potential index-related selling remains uncertain.
On Thursday, MSTR rebounded from the previous day’s close of $143.24 to $151.29. On Friday, it fell another 9.56% to close at $136.83, with trading volume more than 40% higher than Thursday’s. Thursday’s rebound didn’t hold, and Friday’s close was lower than Wednesday’s. The QQQ also fell about 2.5% that day, so the broader market was a headwind too; it would be wrong to attribute MSTR’s entire decline to the new rules.
MSCI’s consultation paper in August used May data to run a simulation, and Strategy was on the proposed removal list at the time. The new rules will first assess operating assets, then screen companies using financial metrics such as cash flow and reliance on financing. The rules have been approved, but Strategy’s final status will depend on the official list.
The final list of affected companies won’t be announced until November 11, and the changes will take effect at the U.S. market close on November 30. If Strategy is removed, funds tracking the relevant indexes will need to sell its shares, and other investors may trade ahead of that possibility. Those sales haven’t been confirmed, so we can’t say in advance when they’ll happen or how much stock will be sold.
I wouldn’t be surprised to see a short-term rebound after a drop of nearly 10%. If MSTR can regain and hold around $151 next week, recovering from this decline, I’ll have to revise my view that rallies are likely to face pressure. That was the closing price before the new rules were announced; it’s simply a level to watch for the market’s reaction, not a guaranteed resistance level.
This will also affect how the company raises money going forward. Most of the funds for the bitcoin purchase disclosed by the company on October 12 came from selling MSTR common stock. The lower the share price, the more shares the company has to issue to raise the same amount, diluting existing shareholders’ stakes. If index-related risk continues to weigh on the share price, raising funds for future bitcoin purchases will also become more difficult.
#MSTR #MSCI #USStocks
Over the first two trading days next week, I expect rallies in U.S.-listed MSTR to remain vulnerable to selling pressure. MSCI’s new rules have been approved, but it has yet to make a final decision on whether Strategy will be removed from its indexes. Friday’s drop was sharp, yet the potential index-related selling remains uncertain.
On Thursday, MSTR rebounded from the previous day’s close of $143.24 to $151.29. On Friday, it fell another 9.56% to close at $136.83, with trading volume more than 40% higher than Thursday’s. Thursday’s rebound didn’t hold, and Friday’s close was lower than Wednesday’s. The QQQ also fell about 2.5% that day, so the broader market was a headwind too; it would be wrong to attribute MSTR’s entire decline to the new rules.
MSCI’s consultation paper in August used May data to run a simulation, and Strategy was on the proposed removal list at the time. The new rules will first assess operating assets, then screen companies using financial metrics such as cash flow and reliance on financing. The rules have been approved, but Strategy’s final status will depend on the official list.
The final list of affected companies won’t be announced until November 11, and the changes will take effect at the U.S. market close on November 30. If Strategy is removed, funds tracking the relevant indexes will need to sell its shares, and other investors may trade ahead of that possibility. Those sales haven’t been confirmed, so we can’t say in advance when they’ll happen or how much stock will be sold.
I wouldn’t be surprised to see a short-term rebound after a drop of nearly 10%. If MSTR can regain and hold around $151 next week, recovering from this decline, I’ll have to revise my view that rallies are likely to face pressure. That was the closing price before the new rules were announced; it’s simply a level to watch for the market’s reaction, not a guaranteed resistance level.
This will also affect how the company raises money going forward. Most of the funds for the bitcoin purchase disclosed by the company on October 12 came from selling MSTR common stock. The lower the share price, the more shares the company has to issue to raise the same amount, diluting existing shareholders’ stakes. If index-related risk continues to weigh on the share price, raising funds for future bitcoin purchases will also become more difficult.
#MSTR #MSCI #USStocks