Key Points
- Strategy, a major Bitcoin holder, is at risk of being removed from the Nasdaq 100 index.
- The issue is whether the company is a tech firm or a Bitcoin investment fund.
- The company’s profits are driven by its crypto holdings, not its original software business.
- Its stock has fallen 65% from its peak, and its market value is now below its Bitcoin holdings.
The company’s Strategy, famous for hoarding billions of dollars in Bitcoin, may be removed from the prestigious Nasdaq 100 index this Friday. Analysts are flagging the company for removal during the index’s annual reshuffle, raising serious questions about its business model.
Strategy began as a software company called MicroStrategy, but in 2020, it pivoted to a new mission: buying and holding as much Bitcoin as possible. The bold move paid off during the crypto boom, and the company’s soaring stock price earned it a spot in the Nasdaq 100 last December.
However, critics now argue that Strategy acts more like a Bitcoin investment fund than a technology company. The numbers support this view.
In its last quarter, the company reported a massive $2.78 billion profit, almost entirely due to an accounting change that let it book gains on its Bitcoin. Meanwhile, its legacy software business generated $128 million in revenue.
This identity crisis is the core of the problem. “If MSTR is deemed to be a holding company or a cryptocurrency company… then it is susceptible to removal,” said Steve Sosnick, an analyst at Interactive Brokers.
The company’s stock has also been extremely volatile, falling 65% from its 2024 peak. Its market value is now around $52.7 billion, which is less than the $61 billion worth of Bitcoin it holds. If Nasdaq removes Strategy, it could trigger a sell-off of about $1.6 billion from passive funds that are required to track the index.
