MSCI finalizes rule that could drop Strategy, other Bitcoin treasury firms from indexes
In brief
- MSCI finalized its "non-operating companies" rule in an announcement dated Oct. 15.
- The change takes effect at the close of Nov. 30 in MSCI's November index review.
- Flagged firms face a five-ratio test; tripping four or more ratios means ineligibility.
- MSCI will publish the final list of affected companies on Nov. 11.
What MSCI's new screen does
The rule puts into effect a proposal MSCI first floated in August, with minor modifications. It screens for corporate issuers that lack substantial operating assets and behave more like passive investment vehicles than real businesses (Decrypt described the target as firms whose balance sheets are dominated by a single asset).
The test runs in two stages. Companies that fail an initial "core screen" go through an exclusion test based on five financial ratios, and a stock is flagged ineligible if it trips four or more. Current index members won't be removed unless they fail the screen in both of their two most recent annual filing periods; new additions are blocked if they fail in either one.
MSCI also scrapped an interim freeze it put in place last year on certain index adjustments for companies whose digital-asset holdings made up 50% or more of total assets. Those firms will now be assessed under the new rules.
Strategy and Metaplanet in focus
Nothing is final for individual names yet.
MSCI said it would publish the final list of affected companies on Nov. 11, so it isn't confirmed whether Strategy, Metaplanet or other treasury firms will be removed. Strategy pioneered the single-asset treasury model and holds hundreds of thousands of Bitcoin. Japan's Metaplanet is among the companies that adopted it.
Saylor had urged MSCI to drop what he called a “discriminatory” rule that would delete Strategy from its benchmarks.
The two companies haven't taken the same approach while the question was pending. According to Decrypt, Metaplanet recently sold 10,000 Bitcoin and bought back 11,000 to demonstrate active treasury management, while Strategy has kept accumulating.
Why index membership matters
Decrypt reported that the move could cut off a significant source of passive investment demand for these companies' shares. That's the core issue.
In Decrypt's analysis, removal from major MSCI indexes would force tracking funds to sell the affected shares, which could pressure stock prices and shrink the premium these companies trade at over their crypto holdings. The Nov. 11 list will show which firms fall into that category ahead of the November index review.
Frequently asked questions
When does MSCI's non-operating company rule take effect?
According to MSCI's Oct. 15 announcement as reported by Decrypt, the change takes effect at the close of Nov. 30 as part of MSCI's November index review. MSCI said it would publish the final list of affected companies on Nov. 11.
How does MSCI decide whether a company is a non-operating company?
Companies that fail an initial "core screen" go through an exclusion test based on five financial ratios, and a stock is flagged ineligible if it trips four or more. Current index members are removed only if they fail in both of their two most recent annual filing periods, while new additions are blocked if they fail in either one.
Why does index removal matter for Bitcoin treasury companies?
Decrypt reported that removal from major MSCI indexes would force tracking funds to sell the affected shares. In Decrypt's analysis, that could pressure stock prices and shrink the premium these companies trade at over their crypto holdings.
