MicroStrategy to Enter Nasdaq 100, Exposing Bitcoin-Linked Stock to Billions in Passive Investment Flows

MicroStrategy (MSTR) is set to soon be included in of the world’s largest exchange-traded funds after becoming the first bitcoin-centric company to win entry into the Nasdaq-100 Index.

The Nasdaq-100 Index tracks the 100 largest non-financial companies listed on the Nasdaq exchange and is filled with dominant market names like Apple, Nvidia, Microsoft, Amazon, Meta, Tesla and Costco.

The price of bitcoin (BTC) added modestly to earlier gains, topping $102,000 in the minutes following the Friday 8 pm ET press release from Nasdaq announcing the inclusion.

On Nov. 29, the day when the Nasdaq took a market snapshot in preparation for the index’s annual rebalancing, MicroStrategy had a market cap of roughly $92 billion. That would rank the Michael Saylor-led company as the 40th largest in the Nasdaq 100 and a likely weighting in the index of 0.47%, according to Bloomberg Intelligence senior ETF analyst Eric Balchunas.

As comparison, Apple — prior to this year’s rebalancing — had the index’s largest weighting at just under 9%; Qualcomm had the 20th largest weighting at just above 1%.

The addition will exponentially increase the Nasdaq 100’s exposure to bitcoin (BTC), of which MicroStrategy owns about $42 billion worth, and expose MSTR to billions in passive investment. ETFs tracking the Nasdaq 100 have more than $550 billion in assets under management, said Balchunas. Easily the largest is Invesco’s QQQ Trust (QQQ) with more than $300 billion in AUM.

“The inclusion of MicroStrategy entering the Nasdaq 100 is possibly the second biggest story of 2024, after the launch of the US spot listed ETFs,” said James Van Straten, senior analyst at CoinDesk. “These funds are often buyers at any price level on a monthly basis which will add to another buyer of MSTR, when Michael Saylor continues to issue the at-the-market (ATM) offering, to dilute shareholders but will have a bigger base of buyers.”

Balchunas’ colleague James Seyffart cautions that there’s a chance that MicroStrategy’s inclusion in the index might be short-lived as the company could be re-classified as a financial firm in March since its value comes almost entirely from its bitcoin holdings and not the actual operating business. MicroStrategy founder and Executive Michael Saylor has even said previously that he plans to turn the company into a “bitcoin bank,” making it even less of a technology operation.

“The game theory now sees the SPDR S&P 500 Trust (SPY), the largest of all ETFs with about $650 billion in AUM, as maybe needing to include MSTR to rival their competitor,” van Straten added. “Millions of investors will now have indirect bitcoin exposure adding to the flywheel effect.”

The re-shuffling of the Nasdaq 100 and consequently the QQQ and related ETFs will go into effect on Dec. 23.

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