Disclaimer: The analyst who wrote this piece owns shares of Strategy MMSTR
Strategy MMSTR might be on observe for potential S&P 500 inclusion by June 20.
Presently, the corporate meets all eligibility necessities besides one: reaching constructive GAAP web revenue over the trailing 12 months (the newest 4 quarters mixed). To qualify, Q1 2025 earnings should be excessive sufficient to offset losses from the earlier three quarters—a aim that might be achieved because of the adoption (now necessary) of the Monetary Accounting Requirements Board (FASB) digital asset accounting rule.
The FASB rule change requires firms to acknowledge bitcoin BTCUSD holdings at truthful worth, which means worth good points will circulate by means of to the underside line (as would worth declines). Previous to this rule, company digital asset holders had been required to account for holdings at their weakest ranges. Strategy, for instance, in the fourth quarter of 2024 nonetheless valued its bitcoin at lower than $16,000 per token, resulting in a $1 billion impairment loss at the same time as bitcoin closed the 12 months at about $94,000.
Holy Grail
Based on an evaluation by Richard Hass on X, assuming Strategy holdings do not change between now and March 31, bitcoin should shut the primary quarter above $96,337 for the corporate to fulfill the constructive trailing 12-month earnings requirement. “Based mostly on This fall 2024 earnings of -$671 million in web revenue MSTR requires $1.113B in Q1 2025 earnings to provide constructive earnings in the prior 4 quarters and turn into eligible for S&P 500,” he wrote. “Based mostly on MSTR’s present treasury of 478,740 BTC, the required BTC worth on March 31 to realize that is $96,337”.
If bitcoin costs stay robust and MSTR continues accumulating tokens, S&P 500 inclusion is inside attain. Mentioned Benchmark analyst Mark Palmer:
“MSTR’s adoption of the amended FASB steerage strengthens its case for S&P 500 inclusion. Given its outperformance of each present index constituent over 4 years, exclusion could be shocking.”
“Whereas becoming a member of the Nasdaq-100 was important, the S&P 500 is the holy grail,” continued Palmer.” Inclusion would validate its Bitcoin technique, as all S&P 500 index funds would maintain MSTR shares, not directly exposing traders to Bitcoin.”Disclaimer: Richard Hass’s unique X publish was made earlier than Strategy’s newest bitcoin buy. CoinDesk reached out for up to date evaluation, together with Monday’s acquisition.