MicroStrategy’s bitcoin success sparks speculation on potential S&P 500 entry

MicroStrategy’s bitcoin success sparks speculation on potential S&P 500 entry

MicroStrategy, the leading corporate holder of Bitcoin, has seen its investment in the cryptocurrency exceed $10 billion, with profits soaring above $4 billion as Bitcoin’s price approached $53,000. 

Since commencing its Bitcoin acquisition in 2020, MicroStrategy has accumulated 190,000 bitcoins at an average cost of $31,224 per coin, totaling $5.93 billion. This bold move has not only resulted in substantial profits but also positioned the company as a significant influencer in the cryptocurrency domain. The recent surge in Bitcoin’s price, exceeding 20% since the start of 2024, has doubled MicroStrategy’s profits from nearly $2 billion in December of the previous year to over $4 billion, according to a recent investor presentation.

The company’s pivot and the ensuing financial success have sparked discussions regarding its potential inclusion in the S&P 500 index. Following a remarkable 46% rally in its stock price within an eight-day period up to Feb. 15, MicroStrategy ranked as the 535th largest publicly listed company in the United States. 

To be considered for the S&P 500, MicroStrategy needs to meet several criteria, including a boost in market capitalization. Currently valued at $12.1 billion, the company’s stock price would need to ascend from $718 to $937 to reach the $15.8 billion threshold for index eligibility.

Beyond market cap, inclusion in the S&P 500 requires satisfying a spectrum of conditions, such as profitability metrics, trading volume, and public shareholding requirements. MicroStrategy has reported a positive sum of profits over its last four quarters, aligning it closer to these rigorous standards. However, the ultimate decision for inclusion rests with the S&P’s executive committee, which assesses companies against a comprehensive suite of benchmarks.

Further emphasizing MicroStrategy’s commitment to the cryptocurrency sector, CEO Michael Saylor has spearheaded the company’s transition toward becoming a Bitcoin development entity. This strategic evolution marks a profound shift in operational focus, aiming to not only enhance the Bitcoin network but also to maximize the value of its substantial Bitcoin holdings. 

Saylor, in recent discussions, pointed to the launch of spot Bitcoin ETFs as a pivotal factor influencing market dynamics, creating a pronounced imbalance between supply and demand. This scenario, he notes, stems from a decade of growing interest in Bitcoin as a viable retail investment option, illustrating MicroStrategy’s intent to lead in the development space within the Bitcoin ecosystem.

Moreover, the company is navigating the potential for further profits with the anticipated accounting change in 2025, which could value Bitcoin at market prices, potentially adding to MicroStrategy’s profits.

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About the Author: Daniel