Strategy wins reprieve from execution and remains in MSCI indices

Bitcoin treasury company Strategy (MSTR) was faced with an existential deadline of January 15 MSCI (MSCI), the global index provider. The company teetered on exclusion from the prestigious MSCI indexes due to its vast cryptocurrency holdings, which now exceed 50% of its total assets. MSCI had proposed setting up such ‘digital asset treasury’ (DAT) companies, arguing that they are more like ETFs or passive investment vehicles than traditional operating companies.

As MSTR neared an inevitable delisting — potentially leading to billions in forced selling by index funds — it was granted a dramatic last-minute reprieve. MSCI announced yesterday that it would not proceed with the exclusion from February’s index review, opting instead for further consultations while freezing certain adjustments to maintain stability. This decision saved MSTR from immediate turmoil, mirroring MSTR’s recent survival in a similar Nasdaq ordeal.

Birth of a crisis

The roots of the MSCI study date back to October, when the index giant proposed a reclassification of DAT companies. These companies, including MSTR, have significant non-operating assets such as Bitcoin (BTC), often financed through share issues or debt. MSCI argued that when digital assets make up more than 50% of a company’s total balance sheet, the line between an operating entity and an investment fund becomes blurred – categories that are not typically eligible for inclusion in stock indices such as the MSCI Global Investable Market Indiceswhich maintain more than $18 trillion in assets. This threshold was seen as a safeguard to ensure that indexes prioritize companies with core operational revenues, rather than companies that derive value primarily from asset valuation.

For MSTR, whose Bitcoin supply has risen to about 673,783 BTC worth about $63 billion, this posed an existential threat. Exclusion could have forced passive funds to dump shares, wiping out billions in market value overnight and exacerbating liquidity problems amid Bitcoin’s volatility.

The complete defense of the strategy

MSTR did not simply take this to heart. Executive Chairman Michael Saylor mounted a strong defense, writing a scathing letter to MSCI, labeling the proposal as “discriminatory, arbitrary and unworkable.” They argued that DATs are bona fide operating companies – in MSTR’s case, a software provider with ongoing business intelligence activities – and not merely investment vehicles.

Saylor claimed that the Bitcoin holdings represent an innovative treasury strategy to hedge against inflation and generate shareholder value, and not a passive fund structure. MSTR emphasized that the 50% threshold unfairly emphasizes digital assets while ignoring similar assets in commodities or real estate of other companies. He claimed the policy would inject a bias into neutral indexing and could undermine American innovation in corporate finance.
Saylor held discussions directly with MSCI, rallying investor support and highlighting potential market disruptions. Their efforts paid off as MSCI recognized the need for broader stakeholder input before any changes took place.

This was not MSTR’s first encounter with index exile. In December, in the midst of a Nasdaq100 reshuffling, similar concerns arose about the cryptocurrency model. Nasdaq ultimately decided to retain MSTR, citing its compliance with listing criteria despite the Bitcoin overhang. That win provided a blueprint for the MSCI battle and strengthened MSTR’s arguments that its dual identity as a tech company and Bitcoin holder deserves inclusion.

In short

The MSTR is up about 4% in premarket trading this morning as a large overhang has been removed. However, the stock remains on a downward spiral, down 47% over the past year as Bitcoin’s price collapsed. Although BTC has regained some ground and is now trading around $92,000, continued downward pressure on the cryptocurrency could lower the MSTR despite the postponement.