• Tue. Jun 18th, 2024

MicroStrategy Listing In The S&P 500 Index Might Expose Millions To Bitcoin

MicroStrategy Listing In The S&P 500 Index Might Expose Millions To Bitcoin

MicroStrategy’s market cap would have to rise another $3.7 billion and meet other eligibility criteria to have an opportunity to make it on the popular index.

Being the biggest corporate holder of Bitcoin, MicroStrategy is gradually moving toward being eligible for being included on the S&P 500 index – a milestone that might see Bitcoin companies appearing on “nearly every portfolio.”

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The Bitcoin (BTC) – focused company would still have to meet strict eligibility criteria and secure a massive market cap, nonetheless.

Data shows MicroStrategy surged to 535th position among the biggest publicly-listed firms in the United States on February 15, after an 8-day trading span that saw its stock price rally 46%.

Largest publicly-listed companies in the U.S. by market cap: Source: Companies Market Cap
Largest publicly-listed companies in the U.S. by market cap: Source: Companies Market Cap

Getting on the S&P 500 index, which tracks the top 500 biggest firms listed on stock exchanges in the United States needs a company to meet many eligibility criteria, including a minimum market cap requirement and a positive sum of profits over the past four quarters, in addition to being profitable in the most recent quarter.

Over 250,000 shares must have also been traded in the past six months, and many of these shares must be in the public’s hands.

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Under current rules, candidate companies require a market cap of $15.8 billion to qualify for the listing. MicroStrategy’s market cap is around $12.1 billion, which means its current price of $718 would be required to surge to $937 if everything else is equal.

Nonetheless, MicroStrategy’s stock has posted a positive sum of profits in the past four quarters, including its most recent quarter.

Even if the criteria are met, the S&P’s 11-member executive committee has to approve MicroStrategy’s listing. The committee temporarily removed electric car maker Tesla from the S&P 500 ESG index in May 2022.

The general index fund rebalances on the third Friday of every March, June, September, and December.

Bitcoin In ‘Nearly Every’ Portfolio

If MicroStrategy seeks an S&P 500 listing and it succeeds, it might “spark a massive positive feedback loop” of Bitcoin exposure in almost every ETF portfolio, as highlighted by Joe Burnett, senior product marketing manager working at Bitcoin financial services firm Unchained.

On that note, if MicroStrategy is featured in the S&P 500, Bitcoin will start “automatically infiltrating nearly every portfolio,” Burnett said.

“This includes your traditional 401k, your pension fund, and every 60:40 portfolio.”

The three biggest exchange-traded funds by assets under management (AUM) track the S&P 500 — namely State Street’s SPDR S&P 500 ETF Trust, BlackRock’s iShares Core S&P 500, and the Vanguard S&P 500 ETF, with more than $400 billion in assets each, according to VettaFi’s ETF database.

If MicroStrategy were to break into the S&P 500, its portfolio weighting would be nearly 0.01% of the entire index fund.

Data shows the S&P 500 currently boasts a market cap of $41.9 trillion. This means MicroStrategy would consume around $12 billion in passive capital allocation at a 0.01% weighting.

Burnett said in a separate X post:

“Passive index flows drive markets. Inclusion would [equal] automatic buying, boosting its share price, enabling more equity issuance for BTC buys further lifting its share price and attracting more passive flows.”

Currently, MicroStrategy holds 190,000 BTC at a beverage buying price of $31,224. It means the company is up $3.9 billion on its investment.

It comes as the company’s founder and chairman, Michael Saylor, announced that MicroStrategy is transitioning from a business intelligence company to a “Bitcoin development firm” on February 9.

The Takeaway

MicroStrategy’s potential inclusion in the S&P 500 index represents a significant milestone for the Bitcoin-focused company. Despite its current market cap of $12.1 billion falling short of the required $15.8 billion, MicroStrategy has shown positive profits in the past four quarters, meeting one of the eligibility criteria.

If the company successfully meets all the criteria and gains approval from the S&P’s executive committee, it could trigger a substantial positive impact on the broader market.

The prospect of MicroStrategy becoming part of the S&P 500 index has the potential to create a positive feedback loop, leading to increased Bitcoin exposure in a wide range of portfolios, including traditional 401k plans, pension funds, and other diversified portfolios. This scenario could result in automatic buying due to passive index flows, boosting MicroStrategy’s share price and attracting more passive capital.

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Kevin Moore - E-Crypto News Editor

Kevin Moore - E-Crypto News Editor

Kevin Moore is the main author and editor for E-Crypto News.

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