Dear MicroStrategy Stock Fans, Mark Your Calendars for January 15

MSCI, an investment research division of Morgan Stanley (MS), has stated that it may order a number of its popular equity benchmarks to stop incorporating MicroStrategy (MSTR) stock. The division has indicated that it intends to make a decision on the matter by Jan. 15. If some of MSCI’s benchmarks do stop factoring in MSTR stock, the shares could drop significantly. That’s because the funds that use MSCI’s benchmarks had $16.9 trillion of assets under management as of the end of 2024.

Indeed, JPMorgan stated in November that if MSCI and its peers remove MicroStrategy from their indexes, the resulting outflows of MSTR may reach $8.8 billion. On the other hand, JPM recently contended that such a move would have “limited” impact on MSTR because the scenario is already reflected in its share price.

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MSCI is considering ejecting from its indexes the shares of companies “whose business model is to buy cryptocurrencies.” MSCI does not allow its equity benchmarks to factor in the shares of investment funds, and it believes that MicroStrategy and its digital asset treasury peers may be similar to such funds.

MicroStrategy Executive Chairman Michael Saylor said recently that he has been discussing the issue with MSCI.

About MicroStrategy

MSTR, which has rebranded itself as Strategy and reported that it owned 650,000 Bitcoin (BTCUSD) as of Dec. 1, has pitched its shares as a means for investors to gain exposure to the cryptocurrency. MSTR stock has fallen sharply along with Bitcoin in recent weeks. In the three months that ended on Dec. 4, its shares had plunged nearly 43%. The shares are 60% below their highs.

Also noteworthy is that, as of the end of last quarter, the company had nearly $8.2 billion of debt. On the other hand, the shares have a low price-book ratio of just 1x, while 12 of 15 analysts who cover the name have a “Strong Buy” rating on it.

CEO Phong Le recently opened the door to selling Bitcoin, saying, “If the stock trades below the value of our Bitcoin, and we can’t raise any other capital to pay the preferred dividends, then mathematically we would have to sell some Bitcoin. It would be the last resort.”

The firm recently disclosed that it had launched $1.44 billion of dollar reserves.

Bitcoin’s Outlook

Obviously, the performance of MSTR stock will be primarily determined by the future price of Bitcoin. One technician recently indicated that the cryptocurrency could rally “toward $99,000” if it manages to exceed the $92,975 level. Conversely, if it fails to reach that point, it may drop below $90,000. The leading cryptocurrency is currently trading hands at just under $92,100, significantly below its recent all-time highs near $126,000.

A rate reduction by the Federal Reserve at its meeting later this month could boost Bitcoin because rate cuts tend to make investors more bullish. But if the Fed keeps rates unchanged, Bitcoin could sink, taking MSTR stock with it.

Finally, if the dollar weakens further going forward, Bitcoin prices could get a meaningful boost.

On the date of publication, Larry Ramer did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

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