MSCI Rule Puts Strategy at Risk of Removal From Global Indexes

Strategy (MSTR) faces possible removal from MSCI’s global stock indexes under a rule adopted Oct. 15, with funds tracking those indexes previously estimated to hold roughly 13 million shares.

The holdings estimate was made before the rule decision. It equated those shares to about 60% of MSTR’s 30-day average daily trading volume.

A simulated screening placed Strategy among companies that might be removed. Its appearance in that exercise does not determine the final index lineup.

MSCI’s new rule makes certain nonoperating companies ineligible for its Global Investable Market Indexes. The screening first examines whether a company has substantial operating assets. Companies that fail that test face five financial-ratio checks; four or more flags make their shares ineligible.

For a company already in an index, removal requires failing the screening in each of its two most recent annual filing periods. MSCI may also use the most recent interim filing if one is available.

MSCI plans to publish the final list Nov. 11. Any resulting changes will take effect at the close of trading Nov. 30.