Michael Saylor’s Strategy could soon be the first crypto company to join the S&P 500. The software-firm-turned-bitcoin-treasury-pioneer has met all the listing requirements. These include a market capitalization exceeding $8.2 billion, trading volumes higher than 250,000 shares per day, a public float of more than 50%, and positive earnings for the most recent quarter and over the past 12 months.
Strategy announced in February that it was changing its name from MicroStrategy. Saylor has advocated for years that Bitcoin represents the best long-term store of value for corporate treasuries. “Unlike cash, which can depreciate due to inflation, or gold, which has high storage and security costs, Bitcoin offers a scarce, borderless and easily transferable reserve asset,” he reported in February.
For companies considering adding digital assets to their capital allocation strategies, Strategy’s SEC filings offer insight into crypto custody. The company’s most recent annual report highlighted risks related to Bitcoin custody. These include the loss or destruction of private keys required to access their Bitcoin and potential cyberattacks.
Strategy holds most of its Bitcoin with United States-based, institutional-grade custodians under protective contractual terms. However, the legal framework for digital asset custody is still evolving.
Strategy pursues S&P 500 inclusion
Despite meeting the financial requirements, inclusion in the S&P 500 is not guaranteed. The US Index Committee, which consists of 10 voting members, has the final say. Decisions are made using a simple majority vote.
The committee takes a holistic view of each candidate, meaning factors beyond financial metrics can influence the final decision. One of the notable challenges for Strategy is the sustainability of its crypto treasury model. The company currently holds 636,505 BTC in its corporate treasury, making it the world’s largest Bitcoin treasury company by holdings.
Market analysts have also flagged Strategy’s high stock volatility as another potential issue, with 30-day price swings averaging 96%. If included, Strategy’s addition to the S&P 500 could have significant impacts on the crypto market. It could potentially attract passive investment flows and interlink digital assets more closely with legacy financial markets.
While Strategy meets the financial criteria for inclusion, its ultimate admission lies in the hands of the US Index Committee. The decision will take into account various factors, including the sustainability of its crypto-heavy treasury model and the volatility of its stock. The outcome could have wide-ranging implications for both the company and the broader crypto market.
