Speculation surrounding a potential exclusion of Strategy—the leading player in the Bitcoin treasury space led by CEO Michael Saylor—had fueled uncertainty in the market.
This concern contributed to a considerable decline in cryptocurrency prices including Bitcoin on October 10, as investors grappled with the implications of losing a key index designation.
Consequently, companies meeting the criterion of holding 50% or more of their assets in digital currencies will remain categorized as they are.
However, MSCI did implement a crucial change in its guidelines, prompting significant implications for treasury-focused companies like Strategy.
Capital-Raising Challenges AheadFor example, if the shares were priced at $300 each and the company issued 20 million new shares, index funds would be compelled to purchase approximately $600 million worth of shares, enhancing Strategy’s ability to raise capital and, subsequently, its Bitcoin holdings.
This shift requires Strategy to seek private buyers for its new shares, which may lead to lower capital raised and an inability to purchase as much Bitcoin as before.
Morgan Stanley’s ETF PlansRover highlights that many investors opt for Strategy as a means to gain passive exposure to Bitcoin, which has contributed to a steady rise in MSTR stock and has established the company as the largest corporate holder of Bitcoin.
The expert also asserts that this situation may prompt large investors to reallocate their funds from Strategy and similar treasury firms into Bitcoin ETFs, particularly given the likelihood that Morgan Stanley’s ETF will attract significant investment.
At the time of writing, MSTR is trading at $166, having made a slight recovery from the 16-month low of $150 reached last Friday.
Featured image from DALL-E, chart from TradingView.com
