As the first publicly-listed firm to adopt Bitcoin as its primary corporate reserve asset, MicroStrategy has blazed a trail in crypto adoption since mid-2020 and now this strategy may unlock access to the world’s most prominent stock index.
Through its continuous Bitcoin acquisition spree over the past few years, MicroStrategy has accumulated a staggering 129,699 Bitcoins, now worth nearly $10 billion. This mammoth Bitcoin position constitutes the majority of the enterprise’s current valuation.
In tandem with its swelling Bitcoin coffers, MicroStrategy’s share price has skyrocketed from around $150 to over $690 today. With a newly minted market capitalization approaching $12 billion, the firm finds itself knocking on the door of the vaunted S&P 500’s entry criteria.
Read more: How Wall Street and Institutional Investors Are Embracing Bitcoin Investment in 2024
Meeting the Eligibility Requirements
The S&P 500 represents the 500 largest U.S. public companies by market cap and serves as the authoritative benchmark for overall stock market performance.
Inclusion in the index provides companies with widened exposure, heightened credibility, and access to the trillions of dollars tracking the S&P 500 through index funds, ETFs, pensions, endowments, and robo-advisors.
The principal eligibility requirements for admission are:
- Market capitalization exceeding $13.1 billion
- Headquartered in the United States
- Sufficient liquidity and financial health
- Public float above 50% of outstanding shares
With its surging market cap, MicroStrategy already complies with a majority of these metrics. By attaining a $13.1 billion valuation through its share price appreciating to $937, MicroStrategy’s case for joining the S&P 500 would grow compelling.
The Impending Impact of S&P 500 Inclusion
Gaining S&P 500 membership could profoundly impact trading in MicroStrategy stock, with investors clamoring to own a publicly-listed vehicle for Bitcoin exposure from the stock market.
As an S&P 500 component, passive inflows into MicroStrategy may be substantial, potentially originating from index funds, robo-advisors, and other passive investment vehicles. Even a 0.5% allocation from S&P 500 ETFs could drive over $650 million of inflows into MicroStrategy’s stock.
These inflows would likely be funneled into additional Bitcoin acquisitions as well, with MicroStrategy’s laser focus on accumulating more Bitcoin undiminished so far.
MicroStrategy Shareholders Leveraged to Bitcoin’s Rise
Despite boasting $10 billion in Bitcoin, MicroStrategy’s enterprise analytics businesses account for less than 10% of its valuation. Essentially, the firm has morphed into a highly-levered play on Bitcoin itself.
This indicates that MicroStrategy shareholders are wielding tremendous upside leverage to the future appreciation of Bitcoin. As a rough proxy, every percentage gain in Bitcoin’s USD value could translate into an equivalent percentage gain for MicroStrategy stock.
Read more: MicroStrategy’s Founder Analyzes Bitcoin Spot ETF and Wall Street Dynamics
Capitalizing on Convergence Through Strategic Exposure
Potential S&P 500 inclusion represents a unique investing opportunity – MicroStrategy may soon offer investors the stability of the world’s most influential index combined with the explosive growth potential of Bitcoin.
Its admission could essentially intertwine Bitcoin’s performance with the overall stock market, enabling participation through simple exposure to an S&P 500 component.
Savvy investors may consider allocating strategic exposure to MicroStrategy stock in anticipation of this event, allowing their portfolios to harness the lucrative convergence between the S&P 500 and Bitcoin’s emergence as a maturing asset class.