U.Today – Eric Balciunas, senior ETF analyst at Bloomberg, opined that it could be a while before business intelligence firm MicroStrategy becomes part of the S&P 500 stock index.
To be part of the index, a company must have cumulative positive earnings over the past four quarters. However, MicroStrategy has only been profitable in one of the past four quarters.
However, new accounting rules will allow the company to record changes in the fair value of properties as net income. This means the company could start reporting impressive earnings that qualify it for inclusion in the S&P 500.
Entry into the stock requires the green light from the S&P 500 Inclusion Committee. This means that even if certain stocks end up being included, they may be ignored.
For example, Tesla (NASDAQ:) was not included in September 2020, despite posting four consecutive quarters of profits. At the time, analysts widely expected the stock to be included in the index, but the disdain caused the stock to plummet. The stock finally joined the index in September.
The committee wants the S&P 500 index to accurately represent the U.S. stock market, but its inclusion criteria are relatively vague. This is a major hurdle for MicroStrategy. “They are known to block eligible stocks before inclusion,” Balciunas noted.
Earlier this week, MicroStrategy, known as Bitcoin's largest corporate holder, was added to the tech-heavy Nasdaq 100 index.
Meanwhile, Bitwise recently predicted that Coinbase (NASDAQ:) could be included in the S&P 500 as early as next year.
This article was originally published on U.Today
