Key Takeaways
- MicroStrategy is likely to be included in the Nasdaq-100 index, pending its classification as a technology company.
- ETFs tracking the Nasdaq-100 may need to buy MicroStrategy shares if included, impacting its stock trading.
Nasdaq is expected to announce its annual reconstitution of the Nasdaq-100 index today, which could result in a number of companies, including MicroStrategy, being added.
According to Bloomberg ETF analyst James Seyffart, MicroStrategy meets several criteria for inclusion in the Nasdaq-100, including its classification as a technology company based on revenue sources.
However, Seyffart noted that MicroStrategy might not be added due to a potential reclassification as a financial stock. The Nasdaq-100 excludes financial institutions like banks and insurance companies.
While MicroStrategy’s software business is a small part of its overall value—the company’s value is now largely tied to its Bitcoin holdings—it is currently still classified as a software company.
The Industry Classification Benchmark could reclassify MicroStrategy, though Seyffart believes this process hasn’t begun.
It’s unclear whether this potential future reclassification will be considered in Nasdaq’s decision. But technically, if MicroStrategy maintains its classification during Nasdaq’s rebalancing announcement, it has a strong chance of inclusion.
The annual changes are expected to be announced this evening, typically around 8 p.m. ET, based on last year’s timeline when six companies were added and six removed.
Implications for MicroStrategy
The Nasdaq-100 Index comprises 100 of the largest non-financial companies listed on the Nasdaq stock exchange. This index features prominent firms from various sectors, primarily technology, but also includes companies from retail, healthcare, and telecommunications.
As such, it serves as a key benchmark for investors seeking exposure to leading US companies, particularly those driving innovation and growth.
Many investment funds and ETFs track the Nasdaq-100. Global ETFs directly tracking the benchmark manage $451 billion in assets, according to Bloomberg, with the iShares QQQ Trust (QQQ) accounting for approximately $329 billion.
Nasdaq-100 inclusion can greatly affect MicroStrategy’s visibility and stock price due to increased demand from these investment funds.
When a company is added to the Nasdaq-100, ETFs that track this index are obligated to purchase shares of that company. That said, if MicroStrategy is added, ETFs like QQQ will be obligated to buy its shares. The influx of capital from these ETFs considerably boosts demand for the stock, often leading to a rise in its share price.
Bloomberg Intelligence estimates that MicroStrategy could see initial net share purchases of around $2.1 billion if it joins the Nasdaq-100 index.
MicroStrategy shares are trading above $400 after Friday’s market opening, up 2.5% over the past 24 hours, per Yahoo Finance data.
