MicroStrategy Joins the Nasdaq 100 Index, Bitcoin Concept Stocks Reach a Milestone

On December 13, NASDAQ announced the annual restructuring results of the 100 Index. Notably, MicroStrategy (MSTR), as a Bitcoin concept stock, will be included in the index, becoming one of the 75 largest non-financial companies on NASDAQ. This change will significantly increase the NASDAQ 100 Index's exposure to Bitcoin, while also providing MSTR with the opportunity to access more passive investment funds.

Currently, the Nasdaq-100 Index includes the largest non-financial companies listed on the exchange, including market leaders such as Apple, Nvidia, Microsoft, Amazon, Meta, Tesla, and Costco.

A senior analyst stated that MicroStrategy being included in the Nasdaq 100 Index could be the second biggest news in 2024, following the US listing of a Bitcoin spot ETF. These funds typically purchase at different price levels on a regular basis, adding a new group of buyers for MSTR. Although Michael Saylor may continue to dilute shareholder equity through market issuances, the expansion of the buyer base might offset this impact.

A senior ETF analyst estimates that MicroStrategy's weight in the index could reach 0.47%, ranking it as the 48th largest holding. This weight corresponds to approximately $2.1 billion in purchases through tracking all ETFs of this index, which have a total market value of about $451 billion. It is important to note that this estimate does not include SMA, CIT, or any active management strategies, so the actual purchase size could be larger.

However, some analysts warn that MicroStrategy's inclusion in the index may only be a temporary phenomenon. Since the company's value comes almost entirely from its Bitcoin holdings rather than its actual operational business, it may be reclassified as a financial company in March next year. MicroStrategy founder Michael Saylor has stated that he plans to transform the company into a "Bitcoin bank," which makes the company's nature more inclined towards the financial sector rather than the technology industry.

There is a view in the market that if the largest ETF - SPDR S&P 500 Trust (SPY) also needs to include MSTR to maintain competitiveness, then millions of investors will indirectly invest in Bitcoin, thus creating a greater flywheel effect.

The restructuring results of the Nasdaq 100 Index, as well as QQQ and related ETFs, will take effect before the market opens on December 23.

Review of MicroStrategy's Bitcoin Strategy

Since mid-2020, MicroStrategy, led by co-founder and chairman Michael Saylor, began investing in Bitcoin to hedge against inflation risks. The company initially used cash for purchases and later shifted to enhancing its purchasing power through the issuance and sale of stocks and convertible bonds.

This strategy, combined with the rapid rise in Bitcoin value, has allowed MicroStrategy's stock performance to surpass that of all major U.S. stocks, including leading companies in the artificial intelligence field. Since August 2020, MicroStrategy's stock price has increased by over 2500%, while Bitcoin's price has risen by approximately 660% during the same period.

As of November 8, 2024, this Virginia-based company holds a total of 423,650 Bitcoins, with a total purchase price of $25.6 billion, and an average cost of $60,324 per coin. MicroStrategy is currently the largest publicly traded company by Bitcoin holdings, excluding a certain fund company.

MicroStrategy also introduced the "BTC Yield" metric to measure the effectiveness of its Bitcoin acquisition strategy. This metric reflects the percentage change in the number of Bitcoins owned per share of the company over a specific period. For example, as of November 17, assuming all convertible debt has been converted into stock, each 1,000 shares of outstanding stock owns 1.29 Bitcoins, an increase of 41.8% from 0.91 Bitcoins on December 31 of last year.

Recently, the BTC yield has shown a rapid upward trend. Just four weeks ago, MicroStrategy announced that "the BTC yield year-to-date has reached 26.4%", a significant increase compared to 17.8% on September 30. The company ambitiously stated that starting next year, it will strive to raise this indicator to a range of 4% to 8%.

Introduction to the Nasdaq 100 Index

The Nasdaq 100 Index is composed of the 100 largest non-financial companies listed on the Nasdaq stock market, with a history dating back to January 1985. The index was launched simultaneously with the Nasdaq Financial 100™ Index, which includes the 100 largest financial stocks listed on Nasdaq. These indices provide benchmarks for financial products such as options, futures, and funds.

The Nasdaq-100 Index is rebalanced every December, coinciding with the quadruple witching day when stock index futures, stock index options, stock options, and individual stock futures expire.

The index is based on the Invesco QQQ Trust (NASDAQ: QQQ) and aims to provide investment results that correspond to the performance of the NASDAQ-100 Index (before fees). Additionally, derivative products based on the NASDAQ-100 Index and the Invesco QQQ Trust are also traded on multiple exchanges.