Key Takeaways
- MicroStrategy (MSTR) will join the Nasdaq-100 on December 23, 2024.
- The company meets market cap and liquidity requirements for S&P 500 inclusion but needs consistent positive earnings.
- Adoption of new FASB accounting standards in Q1 2025 could accelerate eligibility.
- Historical precedents (e.g., Tesla) suggest significant price appreciation often precedes index inclusion.
Broker Analysis: MicroStrategy’s Index Potential
Benchmark highlights that while MicroStrategy’s Nasdaq-100 inclusion is notable, its long-term opportunity lies with the S&P 500. The report notes:
- Market Cap & Liquidity: Easily meets thresholds.
- Earnings Requirement: Must show positive earnings in the latest quarter and cumulative profits over four consecutive quarters.
- FASB Adjustment: Adopting new Bitcoin accounting standards in early 2025 could position the company to "begin reporting positive earnings immediately."
Nasdaq-100 Impact
- MicroStrategy becomes the first Bitcoin-focused company in the index.
- Weighting: 0.47% (40th largest component).
- ETFs like Invesco QQQ Trust will add MSTR to their portfolios.
S&P 500 Inclusion: A Game Changer?
Why It Matters
- ETF Exposure: The top 3 S&P 500 ETFs (SPY, VOO, IVV) hold over $1.8 trillion in assets under management (AUM).
- Historical Precedent: Tesla’s stock surged 10x between December 2019 and its S&P 500 inclusion in December 2020.
Market Implications
"A significant portion of MicroStrategy’s gains may occur before actual S&P 500 inclusion," suggests Benchmark, citing Tesla’s trajectory.
FAQs
1. What are the requirements for S&P 500 inclusion?
- Minimum market cap, liquidity, and consistent positive earnings.
2. How might FASB accounting changes help MicroStrategy?
- New Bitcoin accounting standards could allow the company to report profits earlier, accelerating S&P 500 eligibility.
3. Which ETFs track the Nasdaq-100?
- The Invesco QQQ Trust Series ETF is the largest, with $200+ billion AUM.
4. What was Tesla’s performance post-S&P 500 inclusion?
- Shares doubled within a year but saw most gains prior to inclusion.
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