MicroStrategy, the world’s largest company for held bitcoins, could soon join the S&P 500 family, establishing itself as one of the top 500 companies in the United States.
After the last Bitcoin rally, which also made the MSTR stock soar, now only another 2 billion dollars of market capitalization are needed to make the big leap in quality.
Entering the S&P 500 would mean exposing MicroStrategy’s stock in “almost all investment portfolios”, with a weight of 0.1% on the index itself, creating a positive flow of buyers.
Let’s see all the details below.
Summary
MicroStrategy’s (MSTR) market capitalization rises to 12 billion dollars after the latest Bitcoin rally: the stock could rightfully enter the S&P 500
MicroStrategy, the largest company holding Bitcoin with a stash of 190,000 BTC, could soon qualify to join the S&P 500, which tracks the 500 most traded companies in the United States.
Last week, following the Bitcoin pump that brought the crypto to the $52,000 area, the MSTR stock had risen to a $12 billion market capitalization, making inclusion in the stock basket increasingly closer.
Currently, the company led by maximalist Michael Saylor is worth precisely 11.41 billion dollars, after investors decided to trigger a brief price correction amidst uncertainties in BTC price action.
The 500th company in the index is J.M Smucker, operating in the US food sector, with a market capitalization of 13.38 billion dollars, so MicroStrategy would only need another 2 billion dollars more to climb 59 positions and be added to the revered index.
Anyway, in order to be included in the S&P500, the business intelligence company must meet strict criteria for eligibility in addition to ensuring an increase in market capitalization.
Indeed, in order to make the big leap, candidate companies are required to record a positive sum of profits in the four previous quarters, as well as being in the black in the most recent quarter.
Furthermore, at least 250,000 shares must have been traded in the last six months and the majority of them must be held by the public.
Considering the current rules, under the same conditions MSTR should rise to 937 USD per share to be eligible for the candidacy.
Finally, even if MicroStrategy meets all the listed requirements, the S&P executive committee, composed of 11 members, reserves the right to personally approve or reject the listing.
The inclusion of MSTR in the S&P 500 would bring the stock into almost all investment portfolios
Only a few notice that entering the S&P 500 for MicroStrategy would mean triggering a positive flow of money, from investors who, sometimes even unknowingly, buy the index and indirectly expose themselves to the MSTR stock.
When you buy an ETF or any product linked to the S&P500, you are buying all the companies included in it, with different specific weights. MicroStrategy in this case would have a weight of 0.01%, while Apple and Microsoft respectively have a weight of 7.01% and 6.96%.
Despite the low inclusion percentage, the US index is still very popular, thanks to the popularity of the products offered by State Street, BlackRock, and Vanguard that invest in American stock companies.
So even a weight as low as 0.01%, for an index with a market capitalization of 41.9 trillion dollars, would mean MicroStrategy absorbing 12 billion dollars in passive capital allocation, more than it currently capitalizes.
Beyond the contribution in terms of purchasing power, the inclusion in the S&P500 would still be a great achievement: MSTR and BTC would effectively enter the pockets of index investors, increasing the mainstream diffusion of the crypto asset.
We remember how even investments in traditional 401k, US pension funds, and 60:40 portfolios have exposure to the index.
As Joe Burnett, senior product marketing manager at Unchained, a financial services company for Bitcoin, points out, if MicroStrategy were to succeed in being listed on the S&P 500, it could “trigger a massive cycle of positive feedback”.
MicroStrategy’s portfolio, which invests exclusively in Bitcoin, has an overall position of 190,000 BTC and is currently worth 9.87 billion dollars.
From September 2020 until today, Michael Saylor has purchased the cryptocurrency on 36 different occasions through a DCA strategy, bringing the average cost price to 31,464 USD.
Overall, the investment is up 65% for a unrealized net profit of 3.88 billion dollars.
If the bullish strength of BTC were to continue unabated in the coming months as it did in the last quarter of 2023, it is very likely that the MSTR stock will also grow at a similar pace, making a possible inclusion in the S&P 500 index increasingly plausible.
