MSCI Boots Strategy and Metaplanet From Stock Indexes

Index provider MSCI is dropping Strategy and Metaplanet from two stock indexes, with the changes taking effect at the close of business on Nov. 30.

That puts a source of share demand at risk for the two Bitcoin treasury companies. Funds tracking the affected indexes will need to adjust their portfolios, potentially adding pressure to future fundraising.

Index Funds Face a November Reshuffle

Strategy’s Class A shares will leave the MSCI USA standard index, while Metaplanet will exit the MSCI Japan small-cap index. Both appear on removal lists dated Nov. 11, turning a possible exclusion into a confirmed departure.

For funds built to follow those benchmarks, the change means reworking their holdings. They generally need to sell the departing companies’ shares or adjust their exposure another way to keep their portfolios in line with the index.

During the consultation, Strategy estimated that MSCI-linked funds held about 13 million of its shares, or 3.1% of its basic shares outstanding. At the time, the company argued that an exclusion would have little effect on its business.

Strategy Says Its Bitcoin Business Should Qualify

The removals follow rules MSCI adopted in October to screen out non-operating companies. Those rules replace interim restrictions on businesses holding at least half their assets in digital assets and apply more broadly than crypto treasuries.

MSCI first checks whether a company has substantial operating assets. If it fails that check, five financial tests follow, with existing index members facing removal after failing at least four tests in both of their two latest annual reporting periods.

Strategy has challenged the idea that its Bitcoin business belongs in the non-operating category. It says it reports its Bitcoin business as an operating segment under U.S. accounting rules. In its earlier response to MSCI, the company put its objection bluntly:

“The proposal injects MSCI’s own policy judgments into index construction, undermining the neutrality and reliability that MSCI’s customers depend on.”

Weaker Shares Could Make Bitcoin Buying Harder to Fund

Strong demand for their stock helps treasury companies raise cash by issuing new shares. Strategy brought in $5.41 billion after fees through its at-the-market share offerings in the third quarter alone.

The company’s then-chief financial officer, Andrew Kang, highlighted the scale of that fundraising in its Oct. 29 results:

“We've also raised $21 billion of equity capital and increased our bitcoin holdings by 26% year-to-date in a challenging bitcoin market.”

If selling pressure pushes a company’s share price down, it has to issue more shares to raise the same amount of money. Existing shareholders who do not buy more will then own a smaller slice of the business.

That leaves management weighing fresh Bitcoin purchases against the cost to existing shareholders. If issuing stock becomes less attractive, less cash may be available for the next round of buying.