Strategy shares fall nearly 10% after MSCI adopts rules that could remove it from indexes

Shares in Strategy, the largest corporate holder of bitcoin, fell 9.56% on Friday 16 October to close at $US136.83, after index provider MSCI adopted rules that could lead to the company’s removal from its global indexes.

Yahoo Finance reported it was the stock’s worst one-day fall since February.

MSCI said on Thursday, US time, that it will treat “non-operating companies” as ineligible for its Global Investable Market Indexes. Companies will first be screened for whether they have substantial operating assets. Those that fail will be tested on five financial ratios, and a company flagged on four or more will be ineligible. Existing index members will be removed only if they fail the screen in each of their two most recent annual filing periods.

The changes take effect from the close of trading on 30 November. MSCI said it will publish the final list of affected companies on 11 November. It will also end interim restrictions on companies whose digital asset holdings were 50% or more of their total assets.

The Block reported that Strategy, Metaplanet and Yellow Cake were flagged in an earlier MSCI simulation.

Strategy had called the proposal “discriminatory”. In a September letter, it said the change would have “no meaningful impact on Strategy’s business”. Funds tracking the MSCI indexes hold about 13 million Strategy shares, or 3.1% of its basic shares outstanding, Investing.com reported.

Sean Farrell of Fundstrat estimated selling by MSCI-linked funds at “around $2 billion”. “I still think the market can absorb the associated flows,” he wrote, according to Yahoo Finance.