MicroStrategy listing in the S&P 500 index could expose millions to Bitcoin

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MicroStrategy, the largest corporate holder of Bitcoin, is slowly creeping toward being eligible for inclusion on the S&P 500 index — a milestone that could see Bitcoin firms appearing on “nearly every portfolio.”

The Bitcoin (BTC)-focused firm would still need to meet strict eligibility criteria and secure a hefty market cap boost, however. 

Data shows MicroStrategy moved up to 535th position among the largest publicly-listed companies in the United States on Feb. 15, following an eight-day trading span that saw its stock price rally 46%.

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Largest publicly-listed companies in the U.S. by market cap: Source: Companies Market Cap

Getting on the S&P 500 index, which tracks the top 500 largest companies listed on stock exchanges in the U.S., requires a firm to meet several eligibility criteria, including a minimum market cap requirement and a positive sum of profits over the previous four quarters, in addition to being profitable in the most recent quarter.

At least 250,000 shares must have also been traded over the last six months, and most of the shares must be in the public’s hands.

Under current rules, candidate firms need a market cap of $15.8 billion to be eligible. MicroStrategy’s market cap sits at $12.1 billion, meaning its current price of $718 would need to rise to $937 if all else is equal.

MicroStrategy’s stock has, however, posted a positive sum of profits over its last four quarters, including its most recent quarter.

Even if the criteria are met, the S&P’s 11-member executive committee must approve MicroStrategy’s listing. The committee temporarily removed electric car manufacturer Tesla from the S&P 500 ESG index in May 2022.

The broad index fund rebalances on the third Friday of every March, June, September and December.

Bitcoin in “nearly every” portfolio

Should MicroStrategy seek an S&P 500 listing and succeed, it could “spark a massive positive feedback loop” of Bitcoin exposure in nearly every ETF portfolio, according to Joe Burnett, senior product marketing manager at Bitcoin financial services firm Unchained.

If MicroStrategy is included in the S&P 500, Bitcoin will begin “automatically infiltrating nearly every portfolio,” Burnett said. “This includes your traditional 401k, your pension fund, and every 60:40 portfolio.”

The three largest exchange-traded funds by assets under management track the S&P 500 — namely State Street’s SPDR S&P 500 ETF Trust, BlackRock’s iShares Core S&P 500 and the Vanguard S&P 500 ETF, with over $400 billion in assets each, according to VettaFi’s ETF database.

If MicroStrategy were to break into the S&P 500, its portfolio weighting would be around 0.01% of the index fund.

Data shows the S&P 500 currently boasts a market cap of $41.9 trillion, which means MicroStrategy would consume $12 billion in passive capital allocation at a 0.01% weighting.

“Passive index flows drive markets. Inclusion would [equal] automatic buying, boosting its share price, enabling more equity issuance for BTC buys further lifting its share price and attracting more passive flows,” Burnett said in a separate X post.

Related: MicroStrategy buys $37M in Bitcoin, bringing holdings to 190,000 BTC

MicroStrategy currently holds 190,000 BTC at an average purchase price of $31,224 — meaning the firm is up $3.9 billion on its investment.

It comes as the firm’s founder and chairman, Michael Saylor, revealed MicroStrategy is transitioning from a business intelligence firm to a “Bitcoin development firm” on Feb. 9.

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