Michael Saylor’s Bitcoin-focused firm, Strategy Inc., is being considered a potential candidate for the S&P 500, one of Wall Street’s most prestigious indexes.
This possibility, which seemed like a pipe dream a year ago, has returned to the forefront after the company met profitability criteria thanks to a $14 billion unrealized gain last quarter. If included in the index, passive funds would have to purchase approximately 50 million shares, representing approximately $16 billion, according to analysis by Stephens Inc.
Saylor’s strategy has now added approximately $70 billion worth of Bitcoin to the company’s balance sheet. If the S&P 500 is included, it could indirectly bring cryptocurrency into institutional investors like pension funds.
However, the process isn’t straightforward. The S&P committee evaluates factors such as liquidity, profitability, trading history, and industry stability. While the company meets the technical criteria with its $22.7 billion market capitalization, high trading volume, and four consecutive quarterly earnings, the index’s technology-heavy nature could influence the committee’s decision.
Strategy Inc. stands out as the strongest liquidity company on Stephens’ list, ahead of other candidates like Robinhood, Carvana, and AppLovin. The addition of Coinbase and Block to the index demonstrates the growing importance placed on the digital asset sector.
Despite this, questions remain about the company’s strategy. Strategy, whose share price fell 17% in August, failed to reach its target capital increase with preferred stock sales, and therefore resorted to issuing common stock again. Furthermore, the company’s 30-day volatility rate of 96%, surpassing that of Nvidia and Tesla, poses a risk to the index.
Membership in the S&P 500 carries not only prestige but also the potential for price appreciation due to the “index effect.” While new members may have experienced short-term gains in the past, the impact is now more gradual as investors pre-calculate this process.
Despite everything, Saylor had previously stated that 2025 could be the year for the S&P 500 to enter the market. Now, all eyes are on the committee’s decision.
*This is not investment advice.