MSCI Could Drop Strategy and Metaplanet From Global Indexes in November

The proposal was to apply a two-stage screen to each industry, with automatic passing of the screen by issuers that held operating assets greater than 50% of total assets. 

Companies below the cutoff would undergo a second assessment of the intensity of their operating assets, expenses, operating cash flow, non-operating fair value changes, and reliance on financing to grow assets.

A non-operating company was any company that triggered any four or more of those five criteria. Member companies would be subject to less stringent criteria, and if they did not pass the screen for eligibility, they would only be excluded after failing it in two consecutive annual reviews. The new candidates who failed the latest review would become ineligible.

In the May MSCI simulation, Strategy, Yellow Cake and Metaplanet were flagged for deletion — with free-float adjusted market capitalizations of $23.93 billion, $1.81 billion and $654 million respectively — while SharpLink, Center Laboratories and Lydia Holding would have been placed on the public watchlist, since they had only one qualifying period of failure.

Should these stocks be removed from MSCI indexes, passive funds following those indexes may be forced to sell them. MSCI has not provided an estimate of the selling pressure. 

In the prior crypto treasury consultation, JPMorgan estimated that, in the absence of Strategy, there would be $2.8 billion of passive selling pressure; this estimate is based on the prior methodology, and not an estimate for the current consultation.

Separately from the August consultation, another change is expected to be made in November.

Strategy remains heavily exposed to Bitcoin. Metaplanet has continued to operate a Bitcoin treasury strategy. Neither company has been removed yet. The May simulation is a hypothetical scenario that uses the given data. 

The actual November outcome will depend upon whether MSCI takes the step, as well as any updated company filings and the persistence tests in the framework.