MicroStrategy to Enter Nasdaq 100, Exposing Bitcoin-Linked Stock to Billions in Passive Investment Flows

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What to know:

  • Nasdaq has announced its Nasdaq 100 annual reshuffling, which now includes MicroStrategy.
  • A recent check showed MicroStrategy would be the 40th-largest company in the Nasdaq 100.
  • Inclusion in the index will earn MicroStrategy a spot in one of the world’s largest ETFs, Invesco’s QQQ Trust (QQQ) with more than $300 billion in AUM.

As an analyst with over two decades of experience in the financial markets, I have witnessed numerous milestones and transformations. The recent announcement that MicroStrategy will be included in the Nasdaq-100 Index is undeniably one of the most intriguing events I’ve come across in a long time.

MicroStrategy (MSTR) will likely join some of the world’s most significant exchange-traded funds following its approval for inclusion in the Nasdaq-100 Index, making it the pioneering bitcoin-focused company to gain entry.

As a researcher, I’d describe it this way: I study the Nasdaq-100 Index, which specifically follows the 100 most significant non-banking companies listed on the Nasdaq Stock Exchange. Notable heavyweights in this index include Apple, Nvidia, Microsoft, Amazon, Facebook (now Meta), Tesla, and Costco.

Following the 8 pm ET press release from Nasdaq on Friday, the value of a bitcoin (BTC) incrementally increased, reaching over $102,000 shortly thereafter.

On November 29, during the market snapshot prior to the annual rebalancing of the Nasdaq index, MicroStrategy’s market capitalization was approximately $92 billion. This places Michael Saylor’s company among the top 40 largest in the Nasdaq 100, with an estimated weighting of around 0.47% in the index, according to Eric Balchunas, a senior ETF analyst at Bloomberg Intelligence.

Previously, Apple held the greatest proportion within the index, accounting for almost 9%, while Qualcomm occupied the 20th spot with a slight overage of 1%.

The addition will exponentially increase the Nasdaq 100’s exposure to bitcoin (BTC), of which MicroStrategy owns about $42 billion worth, and expose MSTR to billions in passive investment. ETFs tracking the Nasdaq 100 have more than $550 billion in assets under management, said Balchunas. Easily the largest is Invesco’s QQQ Trust (QQQ) with more than $300 billion in AUM.

James Van Straten, senior analyst at CoinDesk, stated that MicroStrategy joining the Nasdaq 100 could be the second most significant event in 2024, following the debut of US spot listed ETFs. These investment funds typically buy MSTR shares at any price point every month, making them another buyer alongside Michael Saylor who continues to issue ATM offerings. This influx of buyers will dilute shareholders but also broaden their base.

James Seyffart, a colleague of Balchunas, raises a concern that MicroStrategy’s position in the index could be temporary due to a potential reclassification of the company as a financial institution in March. This is because nearly all of its value stems from its bitcoin holdings rather than its core business operations. In fact, Michael Saylor, founder and executive of MicroStrategy, has stated his intention to transform the company into a “bitcoin bank,” further diminishing its technological character.

According to van Straten, game theory suggests that the SPDR S&P 500 Trust (SPY), the largest ETF with approximately $650 billion in assets under management, might benefit from incorporating MSTR to compete more effectively. This move could potentially provide millions of investors with indirect exposure to Bitcoin, further amplifying its impact.

On December 23, the adjustment of the Nasdaq 100 composition, which includes the QQQ and other related ETFs, will take place.

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2024-12-14 04:14