Strategy Asks Shareholders to Challenge MSCI Over Index Removal

Strategy is asking shareholders to contact MSCI and oppose an eligibility rule that will remove the Bitcoin treasury company from global indexes, while arguing the passive fund exposure is limited.

Strategy puts MSCI-linked fund holdings at roughly 13 million shares, or 3.1% of its basic shares outstanding. The company says that amount represents less than one day of trading and about 60% of its average daily volume over the past 30 days.

MSCI’s removal takes effect Dec. 1, after the Nov. 30 market close, under the November index review. The change follows a revised eligibility screen for companies whose assets are weighted toward investments rather than operating businesses.

Strategy called the test “misguided” and urged MSCI to withdraw it. The company argues that “operating” and “non-operating” are not defined under U.S. generally accepted accounting principles or International Financial Reporting Standards (IFRS), or in a recognized legal framework. Strategy also says its Bitcoin business is reported as an operating segment under U.S. GAAP.

The revised framework does not name Bitcoin or cryptocurrency. The screen begins by measuring operating assets against total assets, with a 50% threshold. Companies below that threshold face five financial tests covering operating asset intensity, expense intensity, operating cash flow, changes in non-operating fair value and capital dependence.

MSCI requires an incumbent to miss the screen in each of its latest two annual filing periods before removal. The index change does not delist Strategy from Nasdaq or require the company to sell any of its Bitcoin. MSCI’s removal is scheduled to take effect Dec. 1, after the Nov. 30 market close.