Key takeaways
- MicroStrategy will likely be included in the Nasdaq-100 index pending its classification as a technology company.
- ETFs that track the Nasdaq-100 may be required to purchase MicroStrategy shares if included, affecting stock trading.
Nasdaq is expected to announce its annual reconstitution of the Nasdaq 100 index today, which could result in the addition of a number of companies, including MicroStrategy.
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.
In contrast, Seyffart noted that MicroStrategy may not be added due to a potential reclassification to a financial stock. The Nasdaq-100 excludes financial institutions such as 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, although Seyffart believes this process has not yet begun.
It is unclear whether this potential future reclassification will be considered in Nasdaq’s decision. But technically, if MicroStrategy maintains its classification under Nasdaq’s rebalancing announcement, it has a strong chance of inclusion.
The annual changes are expected to be announced tonight, usually around 8:00 PM ET, based on last year’s timeline when six companies were added and six were removed.
Implications for MicroStrategy
The Nasdaq-100 Index includes 100 of the largest non-financial companies listed on the Nasdaq stock exchange. This index shows outstanding companies from various sectors, mainly technology, but also includes companies from retail, healthcare and telecommunications.
As such, it serves as an important 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 that directly track the benchmark manage $451 billion in assets, according to Bloomberg, with the iShares QQQ Trust ( QQQ ) accounting for about $329 billion.
Nasdaq-100 inclusion could greatly affect MicroStrategy’s visibility and share price due to increased demand from these investment funds.
When a company is added to the Nasdaq-100, ETFs that track that index are required to buy shares of that company. That said, if MicroStrategy is added, ETFs like QQQ will be required to buy its shares. The inflow of capital from these ETFs significantly increases demand for the stock, often leading to an increase in the share price.
Bloomberg Intelligence estimates that MicroStrategy could see initial net stock purchases of about $2.1 billion if it joins the Nasdaq 100 index.
MicroStrategy shares are trading above $400 after Friday’s market open, up 2.5% in the past 24 hours, according to Yahoo Finance data.
