MicroStrategy will be added to the Nasdaq 100

Monday, December 23, 2024, the stock of MicroStrategy is expected to be added to the Nasdaq 100.

In fact, the MSTR stock appeared on the Bloomberg Intelligence terminal among those expected to be added to the index. 

The Nasdaq 100 index

The NASDAQ-100 is a stock index that includes the largest 100 non-financial companies listed on the Nasdaq. 

It is a weighted index, meaning that the weight of the different stocks is proportional to their market capitalization. 

Furthermore, it is an index from which purely financial companies are excluded, and it also includes some foreign companies. 

In some ways, it may seem similar to the S&P 500 index, but it has significant differences, including the two main ones being that the S&P 500 is composed of 500 stocks, not 100, and that the S&P 500 also includes companies listed on other US exchanges, not just on the Nasdaq. 

The Nasdaq (National Association of Securities Dealers Automated Quotation) is a stock exchange based in New York, but different from the NYSE (New York Stock Exchange), which is the historic New York stock exchange, often called Wall Street.

While the NYSE was born in the distant 1792, the Nasdaq was born only in 1971 in the form of an electronic stock exchange, when all the other stock exchanges in the world were still physical places where flesh-and-blood operators sold and bought shares from each other. 

The Nasdaq 100 index, on the other hand, was created in 1985, and it is important because the Nasdaq is still the most active exchange in the USA by trading volume, as well as the second in market capitalization after the NYSE. 

The five largest companies in the world by market capitalization, the only ones above 2,000 billion dollars, are all listed on the Nasdaq. 

MicroStrategy ready to be part of the Nasdaq 100

MicroStrategy now has a market capitalization that exceeds 80 billion, and although it is quite distinct from, for example, Apple or Nvidia from this point of view, it is among the top 250 in the world, ahead of Petrobras, SoftBank, Dell, CME, and Airbnb. Furthermore, it is not very far from Intel or PayPal. 

To tell the truth, until a few weeks ago, its market capitalization was much lower. 

Suffice it to say that if today the price of its shares hovers around $380, at the beginning of November it was below $250, and at the beginning of the year even below $70. 

Note that the peak of 2021 of the stock price MSTR was reached in February above $130, which is a much lower figure compared to current levels. 

Indeed, during the bear-market of 2022, it fell to below $20, which is more than ten times lower than the current level. 

In light of this enormous volatility, it is not even certain that once it enters the Nasdaq 100, MicroStrategy can remain there for long. 

However, it should be added that if the bull run of Bitcoin were to continue, it seems difficult for the price of MSTR shares to return to last year’s levels. 

MicroStrategy and Bitcoin

By now, the main business of MicroStrategy is investing in BTC. 

It started in mid-2020, when the price of Bitcoin was around $11,000 and the price of MSTR shares was around $15.

Since then, he has never stopped accumulating Bitcoin. 

Already at the end of 2020, it had widely surpassed 30,000 BTC, and by mid-2021, it also surpassed 100,000 BTC. 

In August of last year, it also surpassed 150,000 BTC, and by April of this year, it had already come to possess more than 200,000. 

In October, it had risen above 250,000, and with Trump’s victory in the USA presidential elections, it brought its possession of BTC to over 400,000 Bitcoin. 

Currently, the market value of the 423,000 BTC it owns exceeds 41 billion dollars, even though the company’s market capitalization exceeds 80. 

The future of MicroStrategy after entering the Nasdaq 100

While on one hand, the inclusion in the Nasdaq 100 should be considered in all respects as good news, on the other hand, some doubts are beginning to arise about the sustainability of this strategy in the long term. 

In particular, the nearly 200,000 BTC purchased in recent months, at prices decidedly high compared to those of previous years, have certainly significantly increased the level of risk for the company’s accounts. 

Moreover, these latest purchases have all been made by resorting to new debt, so much so that the company has accumulated many billions of dollars in debt, contracted, however, precisely in dollars. 

The idea is that the real value of that debt over the next few years may decrease due to inflation, and that instead the real value of the BTC purchased may increase. However, although there are real possibilities that this may happen, it is not at all guaranteed, and if it does not happen, it would be trouble for MicroStrategy.