MSCI's proposed five-flag screen for non-operating companies could delete Strategy and peers from global benchmarks, with JPMorgan projecting up to $11.6 billion in combined outflows if other index providers adopt similar rules.
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Strategy urges MSCI to drop screen risking $2.8B in outflows
Strategy Inc. formally asked MSCI to withdraw a proposed eligibility screen that would remove the Bitcoin treasury company from its global benchmarks, a change JPMorgan estimates could drive $2.8 billion in passive fund outflows.
Executive Chairman Michael Saylor and CEO Phong Le called the proposal "discriminatory, arbitrary, and misguided" in a letter published Monday, arguing it repackages an earlier MSCI effort targeting digital asset treasury firms that the index provider shelved in January after opposition from more than 250 organizations and 1,500 signatories.
The consultation, opened in August, applies a five-flag screen to companies whose operating assets fall below half of total assets. A simulation based on May 2026 data identified three deletions: Strategy at $23.93 billion float-adjusted market capitalization, UK uranium investor Yellow Cake at $1.81 billion, and Japan's Metaplanet at $654 million. Three additional companies — Ethereum treasury holder SharpLink Gaming, Taiwan's Center Laboratories, and Turkey's Lydia Holding — would be placed on a public watchlist.
Strategy accounts for roughly 87 percent of the float-adjusted market value across all six affected companies, according to the letter. Funds tracking MSCI's Global Investable Market Indexes hold about 3.1 percent of Strategy's basic shares outstanding. JPMorgan analysts estimated in November 2025 that exclusion could drive $2.8 billion in outflows, potentially reaching $11.6 billion if other index providers follow.
Accounting Standards vs. MSCI's Screen
The dispute centers on how MSCI distinguishes operating from non-operating assets. Strategy contends that neither U.S. GAAP nor IFRS provides the definition MSCI uses in its proposed methodology, and that existing U.S. securities law offers no equivalent test.
Strategy's second-quarter 10-Q, filed August 3, defines its Bitcoin treasury operations as a separate reportable operating segment. The company records Bitcoin fair-value changes within operating expenses, a treatment adopted after discussions with Securities and Exchange Commission staff. Under that approach, Strategy argues it would not trip the expense or fair-value flags in MSCI's screen.
The company also questioned why the framework would not similarly affect other asset-heavy businesses. Its letter cited real estate investment trusts, timber companies, and energy infrastructure firms as entities that could remain eligible despite holding large pools of assets.
"MSCI's continued effort to discriminate against digital assets is misguided and calls into question MSCI's neutrality and reliability," the letter said.
MSCI is accepting stakeholder feedback until September 30, with results expected by October 16. Any changes adopted would take effect in the November 2026 index review. Strategy has asked MSCI to base any final methodology on recognized accounting or legal standards and to apply rules only to financial filings released after the methodology is finalized.
The index eligibility question adds another layer to Strategy's capital structure. The company relies heavily on equity markets to finance its Bitcoin accumulation, and removal from widely tracked benchmarks could reduce passive and benchmark-linked demand for its common shares. Strategy disclosed Monday it purchased 4,603 BTC at an average price of $80,318 per coin, lifting total holdings to 845,050 BTC acquired for approximately $63.73 billion.
Strategy shares closed up 4.42 percent Monday at $132.94, though the stock remains down roughly 15 percent year to date. In premarket trading Tuesday, shares pulled back to around $129.
While Saylor and Le maintain the proposal would have "no meaningful impact" on Strategy's underlying business, the potential shift in the investor base remains a material consideration for a company whose capital strategy depends on continued access to equity financing. If MSCI proceeds, other index providers including LSEG's Russell and Nasdaq could follow, expanding the scope of forced selling beyond the initial $2.8 billion estimate.
This article is for informational purposes only and does not constitute investment advice.
