MicroStrategy Looks Poised to Join Influential Nasdaq-100 Index. Here’s What That Means for the Stock.

This
would
guarantee
new
money
flowing
into
Michael
Saylor’s
stock
and
would
bring
more
bitcoin
into
an
important
TradFi
benchmark.

Dec
3,
2024,
5:06 p.m.
UTC

The
analyst
who
co-wrote
this
piece
owns
shares
of
MicroStrategy
(MSTR).

Despite
all
the
weird
memecoins
and
degen
behavior
in
2024,
ETFs
are
in
the
running
for
story
of
the
year
in
cryptocurrency
investing.

And
that
story
—
which
began
when
bitcoin
and
ether
exchange-traded
funds
debuted
to
great
fanfare
—
might
not
be
over.
After
a
sixfold
surge
in
its
stock
price
this
year,
Michael
Saylor’s
bitcoin
(BTC)
investment
firm
MicroStrategy
(MSTR)
looks
poised
to
join
one
of
the
biggest
exchange-traded
funds
around,
the
$312
billion
Invesco
QQQ
ETF
(QQQ).

That
fund
tracks
the
Nasdaq-100
Index.
Every
December,
Nasdaq
shakes
up
the
membership
list
for
that
benchmark,
which
then
filters
into
the
Invesco
fund
(which
copies
Nasdaq’s
decisions
exactly).
The
Nasdaq-100,
roughly
speaking,
tracks
the
100
largest
non-financial
companies
listed
on
the
Nasdaq
exchange.
There
are
other

eligibility
criteria
that
must
be
met
—
and
MicroStrategy
checks
those
boxes.

“The
index
is
passive
and
rules-based
and
it
should
just
follow
the
rules.
The
market
is
indicating
that
MSTR
belongs
in
the
index
and
thus
the
ETF,
and
therefore
it
should
be
added,”
said
James
Seyffart,
ETF
analyst
at
Bloomberg
Intelligence.

This
conveys
more
than
bragging
rights;
it’s
membership
in
an
exclusive
club
alongside
giants
like
Nvidia
(NVDA),
Apple
(AAPL)
and
Microsoft
(MSFT)
in
an
ETF
that
regularly
boosts
daily
trading
volume
in
the
tens
of
billions
of
dollars.
It
guarantees
passive,
permanent
capital
will
flow
in.

Getting
added
“will
open
up
flows
to
a
new
class
of
investors
that
would
not
otherwise
have
singularly
bought
a
stock
like
MSTR
on
their
own,”
said
Jeff
Park,
head
of
alpha
strategies
at
Bitwise.
“Indexing,
in
a
way,
is
a
financial
tool,
like
banking
is
a
financial
tool,
because
it
is
a
liquidity
transformation
tool.”

The
decision
would
also
essentially
bring
more
bitcoin
into
the
index.
Saylor
has
loaded
up
MicroStrategy
with
a
$37
billion
stockpile
of
bitcoin
over
the
past
four
years,

transforming
his
decades-old
software
firm
into
one
of
the
largest
crypto
investors
in
the
world.
To
conceptualize
how
much
bitcoin
that
is,

Bloomberg
data
shows
that
the
$37
billion
holdings
are
now
worth
more
than
Nvidia’s
(NVDA)
$34.8
billion
(NVDA)
and
Tesla’s
(TSLA)
$33.6
billion
cash
and
marketable
securities
holdings.
Now,
the
fortunes
of
a
prominent
conventional
stock
index
and
ETF
would
ride
to
an
even
greater
degree
on
bitcoin.
Tesla
is
already
in
the
index
and
holds
the
cryptocurrency.

“For
millions
of
passive
investors,
owning
ETFs
like
QQQ
(which
tracks
the
Nasdaq-100)
will
provide
indirect
bitcoin
exposure
to
their
portfolios
through
MicroStrategy’s
holdings,”
said
Ben
Werkman,
founder
of
quant
research
firm
NumerisX.
“Since
these
funds
are
often
buyers
at
any
price,
their
participation
has
the
ability
to
potentially
exert
significant
upward
pressure
on
the
price
of
the
equity.”

This
is
all
technically
theoretical
at
this
point.
Nasdaq
will
announce
its
decision
on
Dec.
13,
with
the
membership
shuffle
taking
place
a
week
later.
The
company
will
base
its
decision
on
market
data
as
of
last
Friday.

Among
eligible
companies,
MicroStrategy
is
the
66th-biggest
by
market
capitalization,
according
to
Seyffart;
the
75
largest
companies
automatically
get
into
the
100-stock
index.
That
likely
equates
to
more
than
$1
billion
of
new
money
coming
into
the
stock
as
Invesco
buys
shares
to
match
MicroStrategy’s
weighting
in
the
index.

A
potential
wrinkle:
Will
the
Nasdaq
committee
that
makes
this
decision
still
consider
MicroStrategy
a
non-financial
company,
said
Mark
Palmer,
managing
director
of
The
Benchmark
Co.
Has
it
strayed
too
far
from
its
software
roots?

“MicroStrategy
at
this
point
meets
the
eligibility
criteria
for
inclusion,”
Palmer
said.
However,
“its
bitcoin
acquisition
strategy
could
make
[the
Nasdaq
committee’s]
analysis
a
bit
less
straightforward.”

If
MicroStrategy
does
get
in,
the
resulting
impact
—
or
lack
thereof
—
could
preview
what
might
happen
if
the
stock
gets
big
enough
to
join
the
even
more
influential
S&P
500
Index,
something
that
could
happen
in
early
2026,
Palmer
added.

Entering
an
index
can
be
extremely
beneficial
for
a
publicly
traded
company.
The
question
is
whether
the
majority
of
returns
get
front-run
before
the
inclusion
or
during
the
company’s
time
in
the
index.

When
Tesla
(TSLA)
entered
the
S&P
500
on
Dec.
21
2020,
it
traded
around
$200
a
share.
The
stock
had
run
up
10-fold
since
December
2019
heading
into
the
inclusion.
Tesla
went
on
to
make
new
highs
in
November
2021
at
$400
a
share.
In
other
words,
the
best
returns
came
before
the
index
addition.

Nasdaq
research
shows
outsized
returns
do
tend
to
precede
the
stock
entering
the
index,
not
after.

Even
still,
MicroStrategy
getting
added
would
be
another
step
toward
bitcoin
becoming
integrated
into
the
conventional
financial
system.

Will
Canny
contributed
reporting
to
this
story.