Strategy Made $19.5 Billion in Profit. So Why Is MSCI Removing It From Stock Indexes?

Judgment

MSCI’s index committee is the decision-maker: it will delete MSTR from the MSCI USA Index after the November 30 close, accepting that index funds holding roughly 13 million shares may sell even though Strategy calls the rule “discriminatory, arbitrary, and misguided.”

Basis

MSCI’s November review lists “STRATEGY A” for deletion from the MSCI USA Index after trading closes November 30, which also removes it from MSCI World and MSCI All Country World. MSCI’s October rules aim to keep non-operating investment vehicles out of indexes meant for operating companies; the deletion list does not say which tests Strategy failed. Strategy’s August letter called the proposal “discriminatory, arbitrary, and misguided” and argued MSCI should be a “mirror of the market, not an arbiter of it.” Mechanism: an ETF tracking the MSCI USA Index generally has to sell MSTR when it leaves the list. Strategy estimated MSCI-linked funds hold roughly 13 million shares, or 3.1% of outstanding common stock. Because Strategy raises money by selling shares and other securities to buy Bitcoin, a lower stock price means issuing more shares for the same cash or buying fewer Bitcoin.