NewsGlobalMicroStrategy Shares Rise as MSCI Shelves Plans to Exclude Crypto Treasury Firms from IndexesMicroStrategy Shares Rise as MSCI Shelves Plans to Exclude Crypto Treasury Firms from Indexes
MicroStrategy shares rose 4.3% in premarket trading after MSCI dropped plans to exclude crypto treasury firms from its indexes, removing near-term technical risks for bitcoin proxy stocks. The index provider had proposed removing digital asset treasury companies in the fall, arguing they resembled investment funds, but reversed course amid industry pushback. While longer-term classification questions remain unresolved, the decision provides relief for companies like MicroStrategy that hold cryptocurrencies as primary treasury assets.
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MicroStrategy shares gained 4.3% in premarket trading on Wednesday following MSCI's decision to shelve plans that would have excluded crypto treasury firms from its indexes. The move removes a significant near-term risk for companies that have adopted digital assets as primary treasury holdings.
MSCI Reverses Course on Crypto Treasury Exclusion
Index provider MSCI had proposed removing digital asset treasury companies (DATCOs) from its global benchmarks in the fall, arguing these firms resembled investment funds, which are excluded from its indexes. The proposal raised concerns that other major index providers might follow suit, potentially impacting the investment appeal of crypto treasury companies.
The reversal provides relief for a growing category of public companies that hold cryptocurrencies like bitcoin and ether as their main treasury assets. These firms have surged in popularity as they offer investors indirect exposure to digital assets through traditional equity markets.
Market Impact and Analyst Perspectives
| Market Performance: | Details |
|---|---|
| MicroStrategy Premarket Gain: | +4.3% |
| Trading Date: | Wednesday |
| Previous Gains: | Trimmed from earlier highs |
"While this decision does not resolve longer-term questions around the index eligibility of DATCOs, it removes a material near-term technical risk for a subset of public equities that function as effective proxies for bitcoin/crypto exposure," said Owen Lau, analyst at Clear Street.
Analysts suggest MSCI may continue to grandfather existing DATCOs already included in indexes while potentially opening broader consultations on non-operating companies later.
MicroStrategy's Pioneering Role
MicroStrategy, led by billionaire Michael Saylor, became the first major public company to adopt bitcoin as a treasury asset in 2020, sparking what became known as the crypto treasury frenzy. The company's shares have experienced significant volatility tied to bitcoin price movements, demonstrating both the opportunities and risks of this treasury strategy.
Many crypto treasury firms have argued they are operating companies developing new products, contesting MSCI's characterization of them as investment fund-like entities. The debate highlights ongoing regulatory and classification challenges facing companies that blend traditional business operations with significant cryptocurrency holdings.
Ongoing Volatility and Future Outlook
Despite their growing popularity, crypto treasury companies remain subject to sharp price swings, with shares staying volatile alongside underlying digital asset prices. The accounting treatment for these companies remains unsettled, with analysts debating whether they should be viewed primarily as holding vehicles or assessed based on their underlying business operations.
Mike O'Rourke, chief market strategist at JonesTrading, noted that "MSCI intends to open a broader consultation on the treatment of non-operating companies... we suspect exclusion is postponed until later in the year." This suggests the issue may resurface as index providers continue evaluating how to classify and treat crypto treasury companies within their benchmarks.
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