Key Takeaways
Why is MSTR suddenly facing real exclusion risk?
MSCI’s updated rules target companies whose balance sheets are dominated by Bitcoin, putting MSTR directly in the danger zone.
How big could the impact be if MSTR is removed?
JPMorgan estimates $2.8 billion in forced passive outflows from MSCI alone. And, up to $8.8 billion+ if other index providers follow.
The Treasury market is waking up to a reality check. Volatility has spiked since Q4 kicked off, and investors are noticing their algorithms aren’t holding up, leaving many stakeholders deep underwater.
Strategy [MSTR] hasn’t escaped the pain either. After back-to-back down quarters, the stock is down nearly 70% to $177, back to Q4 2024 levels, while Bitcoin [BTC] only lost about 21% in the same stretch.
JP Morgan analysts are now flagging a potential risk – MSTR could be excluded from the upcoming Morgan Stanley Capital International (MSCI) review in January. The question is, is this a classic “sell-the-news” event?
MSTR’s valuation loop falters at the worst possible time
MSTR’s underlying engine is starting to show cracks.
From a technical standpoint, MSTR has lost 40% in just the last month and is down 68% from its ATH. The company currently holds 649,870 Bitcoin at an average cost of $74,433 per coin – A massive exposure.
Technically, that means if BTC drops another 8% off the $80k-level, the company’s position would move fully into the red. That pressure has hit the stock and its premium hard, making $160 a solid floor for MSTR.
Source: TradingView (MSTR/USDT)
Notably, this is exactly why JP Morgan’s thesis matters.
MicroStrategy’s old playbook was simple – Raise money from the stock, buy BTC, the stock goes up, and repeat. However, that loop is now broken. When the stock trades near its BTC value, there’s no premium left to fund buying.
For example, if MSTR’s BTC/share is worth $150 and the stock trades at $300, the company can sell shares and buy BTC. However, if the stock is trading closer to $150, there’s no premium left. So, the cycle stops.
With that in mind, MSTR’s possible exclusion from MSCI doesn’t feel hypothetical anymore. And, with the decision less than two months away, what exactly are analysts expecting from this high-risk event?
Massive outflows loom as Microstrategy faces index risk
MSCI’s new criteria for DATs puts MSTR directly in the spotlight.
MSCI has indicated that firms whose Bitcoin holdings dominate their balance sheets could be re-classified. In a more severe scenario, they could even be removed from major indices altogether.
And, the market is already pricing that in. As mentioned above, MSTR’s valuation premium has been shrinking fast. That’s only added to investor concerns, keeping the stock at risk of sliding down towards the $160-level.
Source: X (Matthew Sigel)
The bigger issue? Bloomberg reported that JPMorgan estimates $2.8 billion in passive flows would be forced to sell if MSCI removes MSTR. And, if other indexes mirror this move, the total outflows could climb to $8.8 billion+.
In short, MSTR is at a real inflection point.
The company is still adding BTC using debt. However, in a risk-off market that strategy is starting to look increasingly exposed. That’s why a full MSCI exclusion in January is no longer just a headline. Instead, it’s a legitimate risk on the table.