Bitcoin Updates: Conventional Indexes' Dismissal Challenges MSTR's Valuation Approach Based on Bitcoin

JPMorgan has delivered a serious alert regarding Michael Saylor's

Inc. (MSTR) if index provider removes the company from major equity indices during its January 15 review. The bank further projects that losses could reach $8.8 billion should other index providers follow suit, intensifying the structural risks for the bitcoin-centric company as its shares trade at levels last seen during the pandemic.

The report points out that MSTR’s presence in leading indices such as the Nasdaq 100, MSCI USA, and MSCI World has indirectly brought

exposure into both institutional and retail investment portfolios. led by Nikolaos Panigirtzoglou, passive funds tracking these indices currently hold around $9 billion of MSTR’s $59 billion market cap. Being dropped from these indices would prompt index-tracking funds to sell, reducing liquidity and making it harder for the company to raise new capital.

Saylor’s approach of aggressively acquiring bitcoin with leverage—now totaling 649,870 BTC worth $48.37 billion—has left

increasingly vulnerable to market swings. The company’s enterprise value has fallen to just 1.1 times its bitcoin net asset value (NAV), the lowest since the pandemic, as its stock lags behind the cryptocurrency it is linked to. to concerns about possible index exclusion, rather than movements in bitcoin’s price, and notes that while active managers aren’t required to follow index changes, ignoring them could harm their reputations.

The S&P 500’s recent decision not to add MSTR highlights ongoing doubts about its business model. The committee categorized it as a software company under GICS, despite its shift to a bitcoin treasury strategy. S&P Dow Jones Indices has not yet changed its classification, making future inclusion more difficult. At the same time,

companies with digital assets making up more than 50% of their total assets directly targets MSTR, which controls over 3% of all bitcoin in circulation.

Saylor remains optimistic, imagining a $1 trillion bitcoin balance sheet as the foundation for a new financial system built on Bitcoin-backed lending and yield products. However,

analysts warn that the company’s strategy of raising equity to buy bitcoin at a premium is no longer working. Since November 2024, the stock has dropped 60%, wiping out its previous premium, and preferred shares now trade at a discount, signaling investor skepticism.

With MSCI’s decision approaching, MSTR’s future depends on whether traditional markets will accept its crypto-focused approach. A negative outcome could force the company’s valuation to reflect only its bitcoin holdings, removing the growth story that once drove its rapid ascent. For now, the market is watching closely as Saylor’s bitcoin gamble faces its most critical challenge yet.