MSCI Decision Could Lead to Strategy’s Removal From Key Stock Indices, JPMorgan Cautions

JPMorgan Flags Index-Exclusion Risk as Key Driver of Strategy’s Weak Performance

JPMorgan (JPM) says the steep lag in Strategy’s (MSTR) share price relative to bitcoin BTC$86,349.64 has little to do with crypto volatility and far more to do with fears that the company may soon lose its place in major stock indices.

In a Wednesday research note, the bank said Strategy’s premium over its underlying bitcoin holdings—once substantial—has mostly vanished. The more recent slide, however, coincides with rising expectations that MSCI could remove the firm from major benchmarks when it releases its Jan. 15 rebalancing decision.

Strategy, founded by Michael Saylor, is currently part of the Nasdaq 100, MSCI USA and MSCI World indexes. JPMorgan estimates that of its roughly $59 billion market capitalization, about $9 billion is held in passive strategies such as ETFs and mutual funds that replicate those indices.

According to the analysts, this embedded index exposure has allowed bitcoin allocations to permeate into a wide range of institutional and retail portfolios. If MSCI drops Strategy—and if other providers eventually follow—the flow could reverse sharply. A removal from MSCI alone could prompt around $2.8 billion in passive outflows, with as much as $8.8 billion potentially at risk industry-wide.

While active funds may choose to maintain their positions, JPMorgan argued that losing index membership would damage Strategy’s standing in the market, complicating efforts to raise capital and potentially reducing overall trading liquidity. Lower liquidity, they said, would make the stock less attractive to large asset managers.

The bank also noted that Strategy’s combined equity, debt and preferred valuation relative to its bitcoin stash is now at its lowest point since the pandemic. A negative outcome in January could push that ratio even closer to parity, effectively anchoring the company’s market value almost entirely to its bitcoin holdings.

Strategy shares were up 3.5% in pre-market trading, hovering near $193.

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