Strategy (formerly MicroStrategy), known for being the largest public holder of Bitcoin, is back in the spotlight with the potential of being included in the prestigious S&P 500 index.
On July 1, Jeff Walton, the founder of MSTR True North, announced that the company is expected to report a net income of $11 billion for the recently concluded second quarter of the year.
Additionally, Bloomberg estimates that the figure could be even higher—up to $14 billion in unrealized profit—due to fair-value accounting standards applied to its Bitcoin holdings. This puts the company in the same earnings league as tech giants like Apple and Microsoft.
Walton highlighted that this achievement clears the final obstacle for S&P 500 inclusion, meeting the profitability criterion based on a four-quarter cumulative positive income. However, the ultimate decision lies with the S&P Index Committee, where discussions are expected.
The S&P 500 consists of 500 leading US public companies by market capitalization, collectively representing around 80% of the total market cap of US equities. Meeting various criteria is necessary for entry into this index, such as US domicile, adequate liquidity, and positive earnings over the past four quarters.
Last year, Strategy was added to several top stock indexes like the Nasdaq 100 and MSCI World Index.
Analysts like Bloomberg’s Eric Balchunas have long seen S&P 500 inclusion as the firm’s “holy grail.” Such a move would validate the firm’s unique Bitcoin-focused approach and enhance its standing in mainstream finance.
The company’s shares trade well above the net asset value of its Bitcoin holdings, primarily due to investor interest in indirect exposure to crypto.
This premium enables the company to issue shares, raise funds, and acquire more Bitcoin. While this may dilute existing shareholders’ equity, it increases the Bitcoin-per-share ratio, ultimately enhancing the intrinsic value of each investor’s stake.
This strategy has also led to elevated share prices that have outperformed those in the S&P 500 index since the firm adopted the Bitcoin standard in 2020.
Strategy has acquired 597,325 BTC so far, valued at over $63.9 billion, with an unrealized gain exceeding $21 billion.
Interestingly, news of potential S&P Index inclusion did not have a positive impact on market sentiment, as Strategy shares were down 6% in early trading on July 1, at $379.20 as of the current time.
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