Michael Saylor, chairman of MSCI, known for its strategy of accumulating Bitcoin (BTC) reserves through its balance sheet, confirmed that MSCI is in discussions with the organization about potentially removing the company from its index.
“We have been in communication with MSCI throughout this process,” Saylor told Reuters, adding that communication continues ahead of any major decisions.
MSCI is considering excluding companies whose business models are heavily dependent on acquiring cryptocurrencies from its indexes, as they are similar to mutual funds. This decision is expected to be announced by January 15th. JPMorgan said the strategy's removal from the MSCI USA and MSCI World indexes could lead to up to $8.8 billion in outflows if other index providers follow suit.
But Thaler argued those expectations are overstated: “I don't think it makes any difference,” the prominent CEO said, adding that JPMorgan's cash outflow projections may not be accurate.
Bitcoin's monthly decline in November was the largest decline since mid-2021, and directly affected Strategy, whose balance sheet relies heavily on Bitcoin. Earlier this week, the company announced that it significantly lowered its year-end profit forecast, expecting a loss of up to $5.5 billion. A month ago, the company had expected profits to be $24 billion.
Thaler pointed out that strategies are inherently vulnerable to volatility.
“The company is based on amplified Bitcoin, so the stock price is naturally going to be volatile. If Bitcoin falls 30-40%, the stock price will fall further. That's the nature of this structure.”
Saylor also claimed that the company operates with a leverage of 1.11, allowing it to withstand a 95% collapse in the price of Bitcoin.
Strategic's inclusion in the index has been a key driver of demand for the company's stock, particularly through MSCI-based ETFs and other passive investment vehicles. A potential delisting could raise questions about the company's ability to raise equity and debt financing in the future.
Among the new criteria being discussed by MSCI is the exclusion from the index of companies whose positions in digital assets exceed 50% of their total assets. This directly targets companies like Strategy, whose balance sheets are centered around Bitcoin.
On the other hand, Thaler believes such a decision would not result in meaningful changes to the company's operations or long-term strategy.
*This is not investment advice.
