Strategy, led by Michael Saylor, is the largest corporate holder of bitcoin. Its business model consists of raising capital to buy bitcoin, making its shares a leveraged proxy for the cryptocurrency.
Present situation
MSCI announced Strategy’s removal from its global indexes, judging it closer to an investment fund than an operating company. The decision threatens billions of dollars of passive flows, while bitcoin lost more than 8% over the week and fell back below $70,000.
Opportunity analysis
Index inclusion has been a structural source of demand for the shares. Its loss reduces passive ownership and may weaken the premium the stock has traded at relative to its bitcoin holdings, which in turn makes it harder to raise capital on favorable terms. Points to watch: the size of forced passive selling, the premium or discount to net asset value, the company’s funding strategy and the direction of bitcoin itself.
Investor outlook: Negative
Without index support and with bitcoin under pressure, the leverage in the model works both ways. Direct exposure to bitcoin, if desired, is now a cleaner choice than the corporate proxy.
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