Strategy (MSTR) Slides as MSCI Adopts Index Rules That Could Drop Bitcoin Treasury Firms

MSTR fell sharply on Friday, October 16, after MSCI adopted new index eligibility rules for what it calls "non-operating companies". Strategy shares were down 3% in premarket trading and 4% at $145.50 during the morning session, and the decline deepened through the day: by 1:14 p.m. ET the stock was about 9.5% lower near $136.94, according to SentiSense's 15-minute delayed quote.

The rules, announced on Thursday, assess companies using a screen for operating assets plus five financial ratios. They replace an interim restriction that targeted firms whose digital asset holdings made up at least 50% of total assets. They take effect with the November index review, after the close on November 30, and MSCI will publish a final list of potentially affected companies on November 11. Removal is not automatic: a current index member is dropped only if it fails the ineligibility screen in each of its two most recent annual filings. MSCI did not name Strategy as removed, but coverage flags it and other digital asset treasury companies as candidates.

The size of any forced selling is debated. Funds tracking MSCI's global indexes hold about 13 million Strategy shares, roughly 3.1% of basic shares outstanding, which Strategy says is less than one day's trading volume. Fundstrat's Sean Farrell estimates about $2 billion of selling across MSCI-linked products and argues the market has had months to prepare.

Other crypto-linked stocks also fell. RIOT was down 4% at $14.94, while CIFR slipped 3% to $9.75 after pricing zero-coupon convertible notes to fund its Barber Lake data center. Separately, Turkish stocks dropped more than 3% after MSCI froze certain upward changes to its Turkey indexes over free-float and trading concerns, an unrelated decision announced the same day.

The next marker is MSCI's November 11 list. Inclusion on it would turn a possible exclusion into a scheduled one, while a clean result would remove the overhang that drove Friday's selling.