Important points
MicroStrategy may be included in the Nasdaq 100 Index, pending classification as a technology company. ETFs that track the Nasdaq 100 must be purchased if they include MicroStrategy stock, which may impact stock trading.
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Nasdaq is scheduled to announce its annual reconstitution of the Nasdaq 100 index today, which could result in the addition of a number of companies, including MicroStrategy.
Bloomberg ETF analyst James Seifert said MicroStrategy meets several criteria for inclusion in the Nasdaq 100, including being classified as a technology company based on its revenue stream.
However, Seifert noted that MicroStrategy may not be added because it could be reclassified as a financial stock. The Nasdaq 100 does not include financial institutions such as banks and insurance companies.
Although MicroStrategy's software business is a small portion of its overall value, and the company's value is largely dependent on its current Bitcoin holdings, it is still classified as a software company.
Industry classification benchmarks could reclassify MicroStrategy, but Seyffart believes this process has not yet begun.
It is unclear whether this potential future reclassification will be considered in Nasdaq's decision. Technically, however, if MicroStrategy maintains its classification during the Nasdaq rebalancing announcement, it is likely to be adopted.
The annual changes are expected to be announced tonight, usually around 8pm ET, based on last year's timeline, which saw six companies added and six removed.
Impact on MicroStrategy
The Nasdaq 100 Index consists of the 100 largest non-financial companies listed on the Nasdaq Stock Exchange. The index includes prominent companies from a variety of sectors, primarily technology, but also includes companies in retail, healthcare, and telecommunications.
As such, it serves as an important benchmark for investors seeking exposure to leading U.S. companies, especially those that drive innovation and growth.
Many investment funds and ETFs track the Nasdaq 100. Global ETFs that track benchmarks directly manage $451 billion in assets, of which iShares QQQ Trust (QQQ) accounts for about $329 billion, according to Bloomberg.
Inclusion in the Nasdaq-100 could have a significant impact on MicroStrategy's profile and stock price due to increased demand from these investment funds.
When a company is added to the Nasdaq 100, ETFs that track this index are obligated to buy shares in that company. However, if MicroStrategy were added, ETFs like QQQ would be obligated to buy the company's stock. The inflows from these ETFs greatly increase demand for the stock, often leading to higher stock prices.
Bloomberg Intelligence estimates that if MicroStrategy joins the Nasdaq 100 index, the initial net purchase price could be around $2.1 billion.
MicroStrategy stock has been trading above $400 since the market opened on Friday and is up 2.5% over the past 24 hours, according to Yahoo Finance data.
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