The development conpany MicroStrategy will be added to the Nasdaq-100 (NDX) technology index. The change will be effective this week. With hundreds of billions in assets tied to the index, the inclusion of MicroStrategy stock (MSTR) is expected to provide a significant boost.
The NASDAQ-100 is an equity index that tracks the performance of the 100 largest non-financial companies listed on the Nasdaq Stock Market. As the second most important U.S. index, the NASDAQ-100 serves as a benchmark for growth-oriented and technology-intensive investments. Passive exchange-traded funds (ETFs) based on the index manage approximately $250 billion. MicroStrategy will now be part of the NASDAQ-100, as announced by the exchange.
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Significant buying pressure for semi-bitcoin fund MicroStrategy
Since 2020, the software company MicroStrategy has borrowed billions to acquire bitcoin. The company's core IT business accounts for a negligible portion of its valuation. Instead, CEO Michael Saylor has turned MicroStrategy into a leveraged bitcoin fund. Using low-cost debt, the founder plans to raise an additional $42 billion to invest in bitcoin. The addition of MicroStrategy stock (ticker: MSTR) to the NASDAQ-100 could give the company a boost.
That's because inclusion typically leads to an increase in stock prices. ETFs and money managers that track the NASDAQ-100 will need to buy shares of the newly added company. With a market capitalization of nearly $100 billion, the index will allocate just over 1% to MicroStrategy stock. This translates into approximately $2.5 billion of buying pressure. Read more about how the company is using the rising stock price to make more bitcoin acquisitions here.
Will a S&P 500 inclusion follow?
MicroStrategy's next goal could be an inclusion in the S&P 500 Index. This leading U.S. stock market index tracks the performance of 500 large-cap companies across various industries. Over $1.1 trillion in U.S. ETF assets track its performance. Unlike the NASDAQ-100, the S&P 500 Committee requires more than just sufficient market capitalization for inclusion. Based on market capitalization alone, MicroStrategy would alrady be ranked 100th.
In addition to being headquartered in the U.S., companies must be profitable for the most recent quarter and for the trailing four quarters to be eligible for inclusion. Under current accounting rules that exclude bitcoin gains from earnings, MicroStrategy has only been profitable in one of the last four quarters. A change to this rule by the U.S. Financial Accounting Standards Board (FASB) will go into effect on January 1. This could open the door for MicroStrategy stock to be included in the S&P 500 Index, unlocking additional billions in passive inflows.
