Crypto
MSCI Adopted the Rules That Could Push Strategy and Metaplanet Out of Its Indexes. Strategy's Shares Fell 10% in Four Days
MSCI finalised on October 15 a framework that excludes companies whose business is mainly holding bitcoin or other financial assets, replacing an interim rule aimed at firms with digital assets above 50% of total assets. The list of affected companies is due on November 11, with changes at the November 30 close. Strategy (MSTR) closed at $136.83 on October 16, down 9.6% on the day and 10.4% on the week.
The index provider that sent Jakarta down 11.6% on Friday finalised another decision the same week, with a smaller but more concentrated set of losers. On Thursday, October 15, MSCI published the final version of a methodology for excluding non-operating companies from its Global Investable Market Indexes, adopting, with minor changes, the framework it had proposed in August. The rules take effect with the November index review: the list of companies affected is due on November 11, and the changes apply at the close on November 30. The targets are companies whose main activity is holding bitcoin or other financial assets rather than running a business.
The mechanics are a two-stage screen. A company is first assessed on whether it has operating assets; if it fails that test, it is then measured against five financial ratios, and failing four of the five makes it ineligible. There are buffers on both the thresholds and the timing: a current index constituent is removed only if it fails the screen in each of its two most recent annual filing periods, and a non-constituent is barred from inclusion if it fails in either. MSCI may use interim filings when available. The framework replaces an interim restriction that targeted companies with digital asset holdings above 50% of total assets, a bright line that several treasury companies had structured around.
A simulation MSCI ran in May on data from that month flagged three potential deletions: Strategy, the former MicroStrategy, which holds more bitcoin than any other listed company; Metaplanet, the Japanese hotel operator turned bitcoin treasury; and Yellow Cake, a UK vehicle that holds physical uranium. SharpLink, an ether treasury company, was on the watch list. Strategy disputed the approach throughout the consultation, with executive chairman Michael Saylor and chief executive Phong Le calling it discriminatory and a September letter from the company arguing the proposal would profoundly harm MSCI's reputation as a reliable and neutral index provider, while also stating that adoption would have no meaningful effect on its business.
The market disagreed with that last point. Strategy's shares fell from $152.68 on Monday, October 12 to $136.83 on Friday, down 10.4% over four sessions; Friday's loss alone was 9.56%, on a day bitcoin fell 0.8%, and the stock traded as low as $134.11. JPMorgan estimated under the earlier version of the proposal that exclusion from MSCI's indexes could prompt about $2.8 billion of selling by funds that track them, a figure the bank has not updated for the final rules. Metaplanet fell 3.6% in Tokyo on Monday to 267 yen.
The decision matters beyond the companies named because it settles a question that has hung over the treasury-company model for a year: whether an index would keep treating a leveraged bitcoin holding as an operating business. The answer is no, with a two-year grace mechanism. Strategy will remain in the indexes if it passes the screen in one of its two most recent annual periods, so the November 11 list is not certain to include it; the price move says investors are not waiting to find out. The November 30 implementation date now sits on the calendar alongside Indonesia's consultation as the second MSCI deadline that markets are pricing months in advance.