MicroStrategy, a software company turned aggressive Bitcoin investor, is on track for potential inclusion in the Nasdaq 100 index following a meteoric stock price rise. Driven by its substantial Bitcoin holdings and the cryptocurrency’s recent surge, MicroStrategy’s market capitalization has skyrocketed, making it a strong contender for the index reshuffle expected this week.
MicroStrategy’s stock price saw a 6% pre-market increase on Wednesday, adding to its already impressive year-to-date gains of nearly 500%. This surge has propelled its market capitalization to an astounding $90 billion. This remarkable growth is largely attributed to the company’s strategic bet on Bitcoin, which recently crossed the $100,000 mark, doubling in value this year. Bitcoin’s ascent has been further fueled by anticipation of a crypto-friendly regulatory environment under the incoming Biden administration.
Inclusion in the Nasdaq 100 would likely trigger further gains for MicroStrategy. Increased visibility and mandatory inclusion in index-tracking funds would expose the stock to a broader investor base. With Bitcoin holdings currently valued at approximately $42 billion, MicroStrategy offers investors indirect exposure to the cryptocurrency market.
Nasdaq 100 inclusion requires a company to be listed on the Nasdaq exchange, rank among the top 100 companies by market capitalization, maintain a minimum daily trading volume of 200,000 shares, and operate outside the financial sector. The official announcement of the reshuffle is anticipated Friday after market close.
According to Art Hogan, chief market strategist at B. Riley Wealth Management, “MicroStrategy seems to check all the boxes to make it into the Nasdaq 100 when it is reconstituted in December.” This sentiment is echoed by Todd Rosenbluth, head of ETF research at VettaFi, who suggests that MicroStrategy’s potential inclusion could attract younger investors seeking exposure to the cryptocurrency market through related ETFs.
Alongside MicroStrategy, data analytics firm Palantir, with its quadrupled market value reaching $160 billion, is another potential candidate for index inclusion. Conversely, Super Micro Computer, facing delays in filing financial reports, might be removed from the index. Despite these challenges, Super Micro CEO Charles Liang expressed confidence in the company’s ability to avoid delisting. Nasdaq has not yet commented on the potential reshuffle.
MicroStrategy’s Bitcoin strategy, initiated in 2020 under the leadership of co-founder Michael Saylor, was a response to slowing software revenue. The company now holds 400,000 Bitcoins, representing over 2% of the total 21 million Bitcoin supply. These acquisitions were financed through a combination of equity and debt financing.
Despite its impressive market performance, MicroStrategy reported a net loss of $340 million for the quarter ending September 20, marking its third consecutive quarterly loss.
However, not all analysts are convinced of MicroStrategy’s suitability for the Nasdaq 100. Michael O’Rourke, chief market strategist at JonesTrading, argues that the company’s market value surge is solely attributable to its Bitcoin investments and not its core software business. He suggests reclassifying MicroStrategy as a financial stock, which would disqualify it from the index. Similarly, J.P. Morgan has likened MicroStrategy to a leveraged Bitcoin fund.
Despite these concerns, Wall Street remains bullish on MicroStrategy, with a unanimous “buy” rating from nine brokerage firms and a median price target of $510, suggesting a potential 35% upside. The upcoming Nasdaq 100 reshuffle will ultimately determine whether MicroStrategy’s Bitcoin-driven growth will earn it a place among the tech giants.
