The S&P 500 Select Committee met yesterday to discuss strategy (previously micro-strategic). Many investors hope that Strategy’s common stock MSTR will be accepted into the well-known S&P 500 Index when it announced its decision Friday, but approval is not guaranteed.
Michael Saylor’s $96 billion Bitcoin (BTC) treasurer appears to have turned off all items on the S&P Dow Jones Indices checklist. These include:
- He has a US residence and earns most of his income from the US.
- List securities (ideally common stock) on a major NYSE, NASDAQ, or CBOE Exchange
- It has a market capitalization ranking at the 85th percentile of the S&P Total Market Index. This is a minimum of $23 billion, fluctuating in real-time prices.
- Trade at least 250,000 shares for each of the six months leading up to the valuation date
- Securing the latest four quarters total of GAAP revenue is a plus
- Report positive GAAP revenues in the most recent fiscal quarter
However, one last obstacle remains.
At the end of the process, the committee, whose members are not openly known, manually approve the components.
S&P US Index Committee decision on MSTR
Decisions regarding admission to the S&P 500 are discretionary. The committee has the ultimate say and does not need to explain its denial.
For example, Tesla experienced long, unexplainable delays due to inclusion, despite meeting technical standards many months ago.
Finally, The reason why MSTR cannot join the S&P 500 index on Friday could simply be at human discretion.
Separate from the Averages Committee, which oversees the Industrial Average of Dow Jones, the S&P US Index Committee includes senior analysts within S&P Dow Jones Indices, co-owned by CME Group and S&P Global.
The Dow Jones Index withholds its average and the name of the US Index Committee from publicly to block financial or social lobbying.
Read more: MicroStrategy’s global web tied to $71 billion Bitcoin stash
The committee has not previously granted access to BTC finance companies. This new type of public equity pioneer, MSTR, is a new type of stock that is overwhelmingly derived from the company’s BTC holdings, rather than a profitable company’s discounted cash flow analysis.
Passive Flow: Index Inclusion Tail
The S&P 500 is the world’s most powerful stock index, responsible for tracking around $470 trillion, market capitalization of more than $52 trillion or 11% of global total wealth.
Hundreds of millions of people around the world are investing in the S&P 500 price tracking fund.
For strategies, including will have a great benefit. As retirement funds receive contributions from workers and their employers, they benefit from passive flows, which are automated purchases.
Unlike discretionary purchases that benefit inventory selected by active investors, passive flows uniquely benefit the components of the index.
Of course, the price of the MSTR can be focused on the announcement of the S&P 500 index, as sophisticated investors buy rumors and sell the news. Therefore, approval is not guaranteed to improve the stock price.
Historically, many companies have met the selection criteria, but have ultimately been rejected. Applovin, like Robinhood, for example, received unexpected denials in June.
Neither company has been given an explanation of the denial and is still hoping for good news on Friday or future decisions.
