MSCI Adopts Non-Operating Company Exclusion Rules Based on 4 of 5 Ratios
Key Facts
MSCI has adopted rules making companies classified as non-operating ineligible for inclusion in its Global Investable Market Indexes, according to its official announcement, after closing consultations on the proposal on September 30, 2026. The new methodology links exclusion to a company failing the operating assets test and then failing 4 or more of 5 financial ratios. The assessment begins by determining whether a company has "substantial operating assets," as described in the announcement. Financial ratio tests apply to companies that fail this initial test, making the business classification and test results together the basis for the decision. The rules are significant for Strategy, which was named among companies slated for deletion in an earlier simulation of the proposal, while the final names of affected companies remain pending until the November review announcement.
The methodology sets an additional time requirement for deleting companies already in the indexes: failing the ineligibility test for a single annual period is insufficient. According to MSCI's announcement, an existing constituent must fail in each of the latest two annual reporting periods to be deleted. A simulation using May 2026 data had indicated the deletion of Strategy, Yellow Cake and Metaplanet from the All Country World Investable Market Index. Those names appeared in the consultation document as the result of applying the proposal to companies using that month's data. The document described reliance on external capital for growth, rather than on a company's own operations, as a characteristic of the non-operating companies covered by the consultation.
The move follows MSCI's earlier decision not to implement a proposal to exclude digital asset treasury companies as part of its February 2026 review. That proposal concerned the category of digital asset treasury companies, while the index provider announced in the same decision that it intended to open a broader consultation on the treatment of non-operating companies generally. It said at the time that it intended to examine "the treatment of non-operating companies in general," broadening the scope of the issue put before market participants. The consultation process thus shifted from a proposal concerning digital asset treasury companies to an examination of companies' eligibility based on the nature of their operating activities. The period for receiving market participants' feedback then ended at the September deadline, before adoption of the methodology combining the operating assets test with financial ratio tests.
In opposing the proposal, Strategy maintains its position on the accounting classification of its bitcoin business, saying it reports the business as an operating segment under U.S. accounting standards. The company said in its consultation response: "Strategy reports its bitcoin business as an operating segment under U.S. generally accepted accounting principles." On share ownership, the company estimates that funds tracking MSCI's Global Investable Market Indexes hold about 3.1% of its basic shares outstanding. It says funds linked to these indexes track about 13 million of its shares, putting a figure on the ownership tied to its index membership. The company compares that amount with trading activity in its shares, saying it is less than a single day's trading volume.
Index membership matters because passive funds and other investors tracking benchmarks are required to own shares of their constituents, according to Reuters coverage published on October 16, 2026. That links a company's eligibility decision to ownership by investors whose holdings are determined by the constituents of the index they track. Investing cited a JPMorgan estimate that Strategy's deletion from MSCI-linked indexes could trigger forced passive selling of about $2.8 billion. That estimate remains conditional on exclusion, the scenario on which the bank based its estimate of potential selling. The company's MSTR shares closed at $151.29 on October 15, 2026, according to EL7 data, in a session preceding the announcement.
MSCI set November 11, 2026, for publication of the final list of affected companies as part of that month's index review announcement. That date matches the November review announcement date in the index provider's official review calendar. Until the list is announced, Strategy's deletion remains a possibility tied to the review's outcome, after its inclusion in the earlier simulation. The index review takes effect on December 1, 2026, according to MSCI's official calendar. The announced schedule thus separates the identification and announcement of affected companies in November from the implementation of the review results in December.