MSCI temporarily does not exclude "coin-holding stocks," Strategy closes up more than 6% after hours! Analyst: The battle is not over yet

MSCI (Morgan Stanley Capital International) announced that it will temporarily not remove “Digital Asset Treasuries (DATs)” from its index products. Once the news was released, the stock price of Strategy (MSTR), the publicly traded company holding the most Bitcoin globally, immediately rose.

Encouraged by the positive news, Strategy, a constituent of the MSCI index, saw its stock price surge over 6% to $168.4 in after-hours trading on Tuesday, recovering from an intraday decline of about 4%. Market sentiment instantly shifted from tension to optimism.

Looking back to October last year, MSCI proposed a shocking plan to review the inclusion criteria for the “Global Investable Market Index (GIMI),” intending to classify companies with digital assets exceeding 50% of their total assets as “quasi-funds,” and planned to exclude these “HODL stocks” during the index quarterly rebalancing in February, posing a significant passive sell-off risk for Strategy.

MSCI’s initial concern was that companies like Strategy and Bitmine, which hold large amounts of cryptocurrencies, operate more like “passive investment tools” rather than traditional operational companies with real businesses. According to MSCI’s existing standards, investment companies (similar to funds or holding vehicles) are not eligible for index inclusion.

However, this proposal immediately triggered strong market backlash. Critics argued that deliberately excluding DAT companies would violate the principle of the index objectively reflecting the market; moreover, accounting standards for cryptocurrencies vary across countries, and forcibly drawing a 50% line is arbitrary and difficult to enforce.

In response, MSCI issued a statement on Tuesday, putting the brakes on the proposal: “For companies in the preliminary list with digital assets exceeding half of their assets, the current index inclusion eligibility will remain unchanged for now.”

Of the 39 companies classified as DAT, 18 are already MSCI index constituents, originally facing removal risks, while the remaining companies may lose future eligibility.

JPMorgan previously warned that if Strategy were removed from major indices like the Nasdaq 100 and MSCI World Index, it could trigger billions of dollars in passive fund outflows, negatively impacting the stock price.

Although Strategy remains in the MSCI index for now, it does not mean it has a “get out of jail free” card. MSCI stated that institutional investors are indeed concerned that some DAT companies perform too much like investment funds, and will initiate a broader review, establishing new evaluation standards for all “non-operational companies.” In the future, financial statements or other indicators may be used to strictly determine whether such companies qualify for index inclusion.

Regarding these developments, TD Cowen analyst Lance Vitanza remains “cautiously optimistic”:

This development is more positive than we initially expected. However, whether this is a victory for the defenders or a temporary reprieve remains to be seen.

Lance Vitanza maintains a “buy” rating on Strategy, with a target price of $500.

MSCI plans to remove cryptocurrency reserve stocks! Strategy condemns: arbitrary, unfair, and hindering innovation