MicroStrategy’s (MSTR) recent addition to the Nasdaq-100 index marks a pivotal moment for the software and Bitcoin-focused company—but its potential inclusion in the S&P 500 could represent an even more transformative milestone in the medium term. According to a recent report by Benchmark, while MSTR’s Nasdaq-100 entry is significant, the broader market impact of joining the S&P 500 could unlock substantial new investor interest and capital inflows.
The Nasdaq-100 announcement came on December 14, 2024, with MicroStrategy set to be officially added on December 23. This positions MSTR as the first company with a primary strategic focus on Bitcoin to enter the prestigious index. At an estimated 0.47% weighting, it will rank as the 40th largest holding within the index, according to Bernstein Research.
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Why S&P 500 Inclusion Matters
While the Nasdaq-100 is a key benchmark for tech-heavy equities, the S&P 500 remains the most widely followed gauge of U.S. large-cap performance. Inclusion in this index triggers automatic buying from trillions of dollars in passive investment funds, including some of the largest ETFs in the world.
Three of the top ETFs by assets under management—SPDR S&P 500 (SPY), Vanguard S&P 500 (VOO), and iShares Core S&P 500 (IVV)—are all indexed to the S&P 500 and collectively manage over $1.8 trillion in assets. Any company added to the index typically sees a surge in demand as these funds rebalance to reflect new constituents.
For MicroStrategy, such inclusion could dramatically expand its shareholder base beyond crypto-native investors and institutional Bitcoin advocates. The move would signal broader financial market acceptance and could further legitimize Bitcoin as a corporate treasury asset.
Current Hurdles to S&P 500 Entry
Despite its massive market capitalization—well above the S&P 500’s typical threshold—and high trading volume, MicroStrategy currently does not meet two critical financial criteria required for inclusion: positive net income in the most recent quarter and cumulative positive earnings over the trailing four quarters.
Historically, MicroStrategy’s financial statements have been impacted by volatility in Bitcoin’s price, as the company holds over 250,000 BTC on its balance sheet. Under previous accounting rules, unrealized losses from Bitcoin depreciation had to be recognized in earnings, often leading to reported net losses even during periods of strong operational performance.
However, a key development may soon change this outlook.
Upcoming Accounting Shift Could Unlock Earnings Positivity
Benchmark analyst Mark Palmer highlighted that MicroStrategy plans to adopt new Financial Accounting Standards Board (FASB) guidance in Q1 2025. This updated framework will allow the company to reclassify its Bitcoin holdings as “digital assets” rather than indefinite-lived intangible assets, enabling it to record gains when Bitcoin’s fair value exceeds its carrying amount—without having to recognize interim losses unless impairment is deemed permanent.
This shift is expected to allow MicroStrategy to report positive earnings almost immediately, assuming Bitcoin prices remain stable or rise. With Bitcoin trading above $80,000 in late 2024, the company’s holdings are significantly above their average acquisition cost of around $33,000 per BTC.
Once consistent quarterly profitability is achieved, MSTR would likely meet all S&P 500 eligibility requirements, clearing the path for potential inclusion.
Historical Precedent: Tesla’s S&P 500 Surge
The potential impact of S&P 500 inclusion can be seen in Tesla’s (TSLA) historic run-up ahead of its addition in December 2020. While Tesla’s stock more than doubled in the year following inclusion—from $200 to over $400 per share—a significant portion of those gains occurred before the official announcement.
In fact, Tesla’s stock price increased nearly tenfold between December 2019 and December 2020, driven largely by speculation and anticipation of index eligibility. This pattern suggests that markets often front-run major index changes, pricing in future demand from passive funds well in advance.
For MicroStrategy, this could mean that much of its upside potential may materialize even before any official S&P 500 announcement—especially if earnings turn positive and analysts begin revising growth expectations upward.
Market Implications and Investor Sentiment
MicroStrategy’s Nasdaq-100 entry already ensures inclusion in the Invesco QQQ Trust (QQQ), the fifth-largest ETF with over $180 billion in assets. This alone will drive new buying pressure from institutional and retail investors tracking the fund.
But S&P 500 inclusion would amplify this effect exponentially. Given the sheer size of S&P-linked ETFs and mutual funds, even a small weighting could translate into billions of dollars in automatic purchases.
Moreover, broader index membership may encourage ESG-focused funds and traditional asset managers—who have historically avoided Bitcoin-related equities—to reconsider their stance, especially if MSTR’s financials stabilize under the new accounting rules.
Frequently Asked Questions
Q: Why isn't MicroStrategy already in the S&P 500?
A: While MicroStrategy meets size and liquidity requirements, it currently reports net losses due to Bitcoin-related accounting rules. The company must show positive earnings in both the latest quarter and over the past four quarters combined.
Q: When could MicroStrategy join the S&P 500?
A: If MicroStrategy adopts the new FASB accounting standard in Q1 2025 and reports positive earnings shortly after, inclusion could happen as early as mid-to-late 2025, depending on S&P Dow Jones Indices' review schedule.
Q: How does Nasdaq-100 inclusion benefit MicroStrategy?
A: It increases visibility, mandates ownership by QQQ ETF holders, and enhances liquidity and analyst coverage—all of which support higher valuations.
Q: Does Bitcoin price affect MicroStrategy's chances of joining the S&P 500?
A: Indirectly, yes. Higher Bitcoin prices improve MSTR’s balance sheet and make it easier to report accounting gains under the new FASB rules, helping achieve profitability.
Q: Will passive funds buy MSTR stock automatically if it joins the S&P 500?
A: Yes. Trillions of dollars in index-tracking funds are required to mirror the S&P 500 composition, leading to significant automatic buying upon inclusion.
Q: Is MicroStrategy primarily a software company or a Bitcoin investment vehicle?
A: Officially, it remains a business intelligence software provider. However, due to its massive Bitcoin holdings—worth far more than its enterprise value—it is increasingly viewed as a proxy for direct Bitcoin exposure.
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Conclusion
MicroStrategy’s entry into the Nasdaq-100 is more than just a symbolic win—it's a structural shift that enhances its credibility and visibility in mainstream finance. But the real prize lies ahead: potential inclusion in the S&P 500. With a favorable accounting change on the horizon and strong momentum in digital asset markets, MSTR may be on the cusp of a new phase defined not just by Bitcoin adoption, but by full integration into the core of American equity markets.
As investor appetite for digital assets continues to grow and regulatory frameworks evolve, companies like MicroStrategy are redefining what it means to be a modern public corporation. Whether through software innovation or strategic treasury management, MSTR’s journey reflects a broader transformation underway at the intersection of finance and technology.
Keywords: MicroStrategy, S&P 500 inclusion, Nasdaq-100, Bitcoin treasury, FASB accounting, MSTR stock, index fund investing