MSCI to remove Strategy from global indexes in updated version, potentially putting billions of dollars in inflows at risk

Full text supplemented with details.

Reuters, November 11 - Index operator MSCI will remove Michael Saylor’s Strategy MSTR.O and other companies from its global indexes, after classifying them as closer to investment funds, a move that could restrict passive investment inflows into these stocks.

Last year MSCI proposed excluding companies holding digital assets accounting for 50% or more of their total assets, and later launched a broader review of what it called “non-operating companies.” The institution added that such companies exhibit fund-like characteristics and are therefore excluded from its benchmark indexes.

In after-hours trading on Wednesday, Strategy’s stock fell 2.5%.

The company had warned last year that if excluded, $2.8 billion of its stock could be liquidated, creating a “chilling effect” across the industry.

Also listed for removal are Metaplanet (3350.T), which is listed in Tokyo and engages in Bitcoin BTC= trading and holding, as well as UK-based uranium procurement company Yellow Cake (YCA.L). These companies will be removed from the MSCI US Index and MSCI World Index on December 1.

Strategy, Metaplanet, and Yellow Cake have not yet responded to Reuters’ requests for comment.

Led by Saylor, Strategy was the first to launch a digital asset reserve last year and frequently funds aggressive Bitcoin accumulation through debt and equity issuance.

This approach has attracted investors seeking indirect exposure to cryptocurrency, driving up the price of Bitcoin, but also makes these companies vulnerable to cryptocurrency price swings.

So far this year, Strategy’s stock has fallen about 20%, while the price of Bitcoin BTC= has dropped 15%.

For companies like Strategy, index inclusion is critical, as passive funds and other investors tracking benchmark indexes must hold their stocks.

JPMorgan previously estimated that if other index providers follow MSCI’s adjustments, as much as $8.8 billion could flow out of Strategy’s stock.

According to the list published by MSCI on Wednesday, companies such as Ethereum financial management platform SharpLink SBET.O have been placed on the watchlist.

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