By Medha Singh
MicroStrategy’s shares have taken a remarkable leap, positioning the bitcoin-enthusiastic company as a prime contender for the Nasdaq 100 index, especially with the annual reshuffle looming this week. As of Wednesday morning, the company’s stock had already surged by 6%.
Although MicroStrategy, primarily a software firm, reports losses, its bold venture into the unpredictable world of cryptocurrency has driven its stock up by nearly 500% this year, climbing its market cap to an impressive $90 billion. Bitcoin, the centerpiece of this narrative, recently smashed through the $100,000 ceiling, a first in its history, doubling its worth just this year alone. This momentum was further fueled by expectations of a crypto-positive policy shift following Donald Trump’s election victory.
Inclusion in the Nasdaq 100 could further accelerate gains for MicroStrategy, as investment firms would pivot to include its shares in their portfolios to align with the index’s composition. To enter this prestigious index, a company must be on Nasdaq’s exchange, rank among the top 100 in market value, trade at least 200,000 shares daily, and not be classified within the financial sector. The outcome of this reshuffle will be unveiled after the markets close on Friday.
Art Hogan, chief market strategist at B. Riley Wealth Management, commented that MicroStrategy likely ticks all the necessary boxes to make it into December’s revised Nasdaq 100. This potential entry could also offer the Nasdaq 100 index indirect bitcoin exposure, thereby making ETFs linked to the index more attractive to younger investors, according to Todd Rosenbluth, head of ETF research at VettaFi.
Meanwhile, Palantir, a data analytics firm, has witnessed a fourfold increase in market value to $160 billion this year, making it another strong contender for the index. On the flip side, Super Micro Computer, an AI server manufacturer, might find itself booted from the index due to delays in filing its annual and quarterly reports, although its CEO, Charles Liang, remains optimistic about maintaining its status.
In response to inquiries, Nasdaq did not comment, as reported by Reuters.
Riding the Bitcoin Wave
MicroStrategy made the strategic decision to adopt bitcoin as its primary treasury reserve asset back in 2020, under the stewardship of co-founder Michael Saylor, as its software business faced revenue challenges. As a result, the company has accumulated a whopping 400,000 bitcoins, making it the largest corporate holder of this digital currency. This venture was financed through a strategic combination of equity and debt, managing to secure control of over 2% of bitcoin’s finite supply, which is capped at 21 million.
The company recently reported a net loss of $340 million for the quarter ending September 20, marking its third consecutive quarterly loss. Despite the buzz, some remain skeptical about MicroStrategy’s potential inclusion in the tech index. Michael O’Rourke from JonesTrading argues that the spike in the firm’s market value stems less from its software endeavors and more from its substantial bitcoin acquisitions, funded through robust equity and debt market activities.
He further suggests that MicroStrategy’s classification might be more fitting as a ‘financial’ stock, which would then disqualify it from being listed in the Nasdaq 100. This perspective was echoed by J.P.Morgan, which recently likened MicroStrategy to a leveraged bitcoin fund. Nonetheless, Wall Street seems optimistic about the stock’s growth prospects; all nine brokerages covering MicroStrategy have rated it a “buy” or higher, setting a median price target of $510—a potential 35% rise from its most recent closing price.
(Reported by Medha Singh in Bengaluru; Edited by Anil D’Silva)
