MicroStrategy Added to Nasdaq 100 Index Following Market Cap Growth

TLDR

• MicroStrategy will join Nasdaq 100 Index in December 2024 rebalancing
• Company’s market cap reached $97.94 billion, making it 40th largest on Nasdaq
• Stock price rose 505% in 2024, driven by Bitcoin holdings worth $42 billion
• Company spent $23.41 billion on Bitcoin at average price of $58,200
• Inclusion gives exposure to major ETFs like Invesco’s QQQ ($352B AUM)

The Nasdaq exchange has announced that MicroStrategy will join its prestigious Nasdaq 100 index as part of its annual December rebalancing. The business intelligence company, which has become known for its substantial Bitcoin holdings, will be added to the index of top non-financial companies on December 23, 2024.

MicroStrategy’s market capitalization has grown to $97.94 billion, securing its position as the 40th largest company on the Nasdaq exchange. This remarkable growth comes after a 505% increase in the company’s stock price since January 2024, when its market value stood at approximately $15 billion.

The company’s rise to prominence stems from its aggressive Bitcoin acquisition strategy, which began in August 2020. Over the past four years, MicroStrategy has invested $23.41 billion in Bitcoin, acquiring the cryptocurrency at an average price of $58,200 per coin.

At current market prices, with Bitcoin trading at $102,800, MicroStrategy’s cryptocurrency holdings are valued at $42 billion. This represents a substantial return on investment for the company, which primarily funded its Bitcoin purchases through debt notes.

The inclusion in the Nasdaq 100 index opens new doors for MicroStrategy in terms of investment exposure. The index is tracked by several major exchange-traded funds (ETFs), most notably Invesco’s QQQ trust, which manages assets worth $352 billion.

Other funds that follow the Nasdaq 100 include the iShares NASDAQ 100 UCITS ETF. These investment vehicles automatically purchase shares of companies included in the index, potentially creating new demand for MicroStrategy stock.

However, the weighting system used by these ETFs means smaller companies receive proportionally less investment. For example, the top 10 companies in the Nasdaq 100 account for 53.1% of Invesco’s QQQ ETF portfolio, with the remaining 90 companies sharing the balance.

The decision to include MicroStrategy comes as part of Nasdaq’s yearly reshuffling of its top 100 largest non-financial companies by market capitalization. This process ensures the index continues to represent the largest and most actively traded companies listed on the exchange.

MicroStrategy’s core business remains focused on providing business intelligence technology and solutions. However, the company’s Bitcoin holdings now represent a major portion of its market value.

This transformation raises potential concerns about the company’s long-term position in the index. If Bitcoin holdings become the primary source of MicroStrategy’s value, it could face reclassification as a financial company, which would make it ineligible for the Nasdaq 100.

The company’s journey from traditional software provider to Bitcoin-holding tech company represents a unique evolution in corporate treasury management. Since beginning its Bitcoin acquisition strategy, MicroStrategy has consistently increased its holdings through both market upturns and downturns.

The timing of MicroStrategy’s Bitcoin purchases has proven advantageous, with the cryptocurrency’s price rising substantially since the company began accumulating it. The average purchase price of $58,200 sits well below current market values.

MicroStrategy’s stock performance in 2024 reflects both the rising value of its Bitcoin holdings and increased investor interest in companies with cryptocurrency exposure. The stock’s 505% rise since January 2024 has outpaced even Bitcoin’s own price appreciation during the same period.

The December 23 rebalancing will mark MicroStrategy’s first inclusion in the Nasdaq 100 index. This addition comes at a time when Bitcoin trades near all-time highs, contributing to the company’s elevated market capitalization.

Trading volume in MicroStrategy shares has also increased throughout 2024, as more investors use the stock as a proxy for Bitcoin exposure through traditional equity markets.