Strategy, formerly known as MicroStrategy, has once again captured the attention of the financial world. This time, the company is in the spotlight for its potential inclusion in the prestigious S&P 500 index.
Recently, Jeff Walton, the founder of MSTR True North, disclosed that Strategy is expected to report an impressive $11 billion in net income for the second quarter of the year. However, Bloomberg has estimated that the figure could actually be higher, possibly reaching up to $14 billion in unrealized profits. This remarkable financial performance is largely attributed to the fair-value accounting standards applied to the company’s Bitcoin holdings.
This financial milestone is significant as it fulfills the profitability criterion required for inclusion in the S&P 500 index. The S&P 500 is composed of the top 500 US public companies by market capitalization and represents a substantial portion of the total market cap of US equities. To be considered for inclusion in this prestigious index, companies must meet certain criteria, including US domicile, adequate liquidity, and positive earnings over the past four quarters.
While Strategy was added to several top stock indexes last year, such as the Nasdaq 100 and MSCI World Index, analysts have long viewed an S&P 500 inclusion as the ultimate achievement for the company. This move would not only validate Strategy’s unconventional Bitcoin-centric approach but also elevate its status in mainstream finance.
Strategy’s stock currently trades at a premium above the net asset value of its Bitcoin holdings, reflecting investor demand for indirect exposure to cryptocurrencies. This premium enables the company to issue shares, raise capital, and acquire more Bitcoin, ultimately increasing the intrinsic value of each investor’s stake.
Since adopting the Bitcoin standard in 2020, Strategy’s share prices have outperformed those in the S&P 500 index. The company has acquired over 597,000 BTC, valued at more than $63.9 billion, with an unrealized gain exceeding $21 billion.
Despite the positive news of a potential S&P 500 inclusion, Strategy’s shares experienced a 6% decline in early trading on July 1, reaching $379.20 as of press time.
In conclusion, Strategy’s impressive financial performance and potential inclusion in the S&P 500 index underscore the company’s innovative approach to investing in cryptocurrencies. As the debate within the S&P Index Committee continues, all eyes are on Strategy as it navigates this significant milestone in its financial journey.