MSCI adopts rules threatening Strategy with potential $2.8 billion share sell-off
Key Facts
MSCI has adopted broader index ineligibility rules covering non-operating companies, with the changes to take effect as part of its November 2026 review, according to an announcement by the index provider. The decision leaves Strategy facing possible exclusion, after Reuters reported the company's earlier warning of a potential $2.8 billion share sell-off if it lost its membership. The company is included in the MSCI USA and World indexes, according to Reuters. Membership matters because passive funds and index-tracking investors are required to hold shares in index constituents. Strategy's exposure to such selling remains contingent on a decision to remove it, as adoption of the methodology does not constitute a final announcement of the company's exclusion.
The methodology begins by screening whether a company has substantial operating assets, then subjects companies that fail that screen to a test based on 5 financial ratios, according to MSCI. A finding of ineligibility requires negative signals in at least 4 ratios, meaning the dominance of a single asset on the balance sheet is not sufficient on its own to trigger exclusion. The ratios listed in the consultation document include operating asset intensity and expense intensity, alongside a cash-flow assessment. They also address fair-value change intensity and reliance on external capital. The assessment thus combines the nature of a company's assets, expenses, cash flows and funding sources, rather than focusing solely on the size of its bitcoin holdings.
A simulation of the proposal using May 2026 data resulted in the deletion of 3 companies from the MSCI ACWI Investable Market Index, according to the consultation document. The simulation included Strategy, Yellow Cake and Metaplanet in a hypothetical application of the rules to the index's constituents at the time. The document said applying the proposal using those data "would result in the deletion of 3 companies." In its coverage of the rules' adoption, Reuters reported that Strategy and Japan's Metaplanet were on the potential deletion list. SharpLink and other digital asset treasury companies were placed on a watch list, according to the agency, distinguishing their status from that of companies listed for potential deletion.
Strategy objected to the proposal, saying it targeted digital asset treasury companies, and asked MSCI to withdraw it. The company said in its consultation response: "We ask MSCI to withdraw its proposal." In defending the nature of its business, it said it reports its bitcoin business as an operating segment under U.S. accounting standards. It added that this treatment was consistent with its discussions with U.S. Securities and Exchange Commission staff. On the extent of index-linked ownership, the company said funds tracking the MSCI Global Investable Market Indexes hold only 3.1% of its basic shares outstanding.
The broader rules follow MSCI's earlier decision not to implement the proposed exclusion of digital asset treasury companies in its February 2026 review. The index provider subsequently moved toward a broader review of non-operating companies' eligibility, rather than proceeding with the earlier treasury-company proposal. It said the consultation revealed institutional investors' concerns that some of these companies resembled investment funds that are ineligible for index inclusion. The interim treatment of treasury companies included freezing increases in the number of shares and foreign and domestic inclusion factors. It also included deferring their addition to indexes and migration between size segments, according to MSCI's announcement.
The methodology gives existing constituents additional safeguards before deletion, requiring them to fail the ineligibility screen in each of their two most recent annual reporting periods. This condition means failure in a single annual period is insufficient to remove an existing company from the index, according to the adopted rules. MSCI may also use the latest interim filing in its assessment, with buffers to protect index stability. The final list of affected constituents is scheduled for publication on 11 November 2026 as part of the review results announcement. The changes take effect after the close on 30 November 2026, according to the timetable set by the index provider.