Potential S&P 500 Inclusion for Strategy (MSTR)
Disclaimer: The analyst who authored this piece owns shares of Strategy (MSTR).
Strategy (MSTR) appears to be on a promising trajectory for potential inclusion in the S&P 500 index by June 20. At present, the company satisfies all eligibility criteria with the exception of one critical factor: achieving positive Generally Accepted Accounting Principles (GAAP) net income over the trailing twelve months, which encompasses the most recent four quarters combined. To meet this requirement, the earnings for Q1 2025 must be sufficiently robust to offset losses from the preceding three quarters. This ambitious target could be attainable due to the recent mandatory adoption of the Financial Accounting Standards Board (FASB) digital asset accounting rule.
The rule instituted by FASB mandates that companies account for their bitcoin (BTC) holdings at fair value. This means that any price gains will positively impact the bottom line, similar to how price declines would. Previously, firms holding digital assets like bitcoin were required to report their holdings at the lowest recorded levels. For instance, in the fourth quarter of 2024, Strategy reported its bitcoin valuation at under $16,000 per token, resulting in a staggering $1 billion impairment loss, despite bitcoin closing the year at approximately $94,000.
The Holy Grail of Inclusion
In a detailed analysis shared by Richard Hass on X, it was noted that assuming Strategy’s bitcoin holdings remain unchanged up until March 31, the cryptocurrency must exceed a price of $96,337 by the end of Q1 for the company to achieve the necessary positive trailing twelve-month earnings. Hass highlighted that “Considering the Q4 2024 earnings reflected a net loss of -$671 million, MSTR needs to generate $1.113 billion in earnings for Q1 2025 to secure positive earnings across the last four quarters and thereby qualify for the S&P 500.” He further elaborated that with MSTR’s existing treasury of 478,740 BTC, the required bitcoin price on March 31 to achieve this target stands at $96,337.
If bitcoin prices maintain their upward momentum and MSTR continues to bolster its token reserves, the prospect of S&P 500 inclusion becomes increasingly attainable. Analyst Mark Palmer from Benchmark remarked, “The adoption of the revised FASB guidance significantly enhances MSTR’s case for S&P 500 inclusion. Given its remarkable outperformance compared to every current index constituent over the past four years, exclusion from the index would be rather surprising.”
Palmer continued, “While gaining entry into the Nasdaq-100 was a notable achievement, the S&P 500 represents the pinnacle of recognition. Inclusion would serve as a validation of MSTR’s Bitcoin strategy, as all S&P 500 index funds would consequently hold MSTR shares, thereby providing investors with indirect exposure to Bitcoin.”
Disclaimer: Richard Hass’s initial post on X was published prior to Strategy’s most recent bitcoin acquisition. CoinDesk has reached out for an updated analysis that incorporates the recent purchase made on Monday.
