Bad news is good news? JP Morgan: Strategy (MSTR.US) stock price has already fully reflected the risk of being excluded from mainstream indices. MSCI's decision may potentially act as a catalyst for a rebound.

According to JPMorgan Chase, the stock price of Strategy (MSTR.US) has already fully reflected the risk of being excluded from mainstream indices such as MSCI. The decision to be announced by the index compiler MSCI may turn out to be a catalyst for the stock price to rise, even if the stock is excluded, it may still trigger passive fund outflows. It is reported that MSCI is considering excluding companies that hold Bitcoin or other digital assets as treasury assets from its indices, and has sought opinions from the investment community on this matter. MSCI stated, "MSCI proposes to exclude companies with digital asset holdings accounting for 50% or more of total assets from the MSCI Global Investable Market Index series." The opinion solicitation period will continue until December 31st, and the final decision will be announced by January 15, 2026. Strategy's CEO, Phong Le, stated on Tuesday that they have initiated a communication process with MSCI. The company's chairman, Michael Saylor, also stated on Wednesday that the company is in discussions with MSCI regarding the possibility of being excluded from MSCI indices. Currently, Strategy is a constituent of the Nasdaq 100 index, MSCI USA index, and MSCI Global index. JPMorgan Chase analysts stated in a report released on November 21st that about $9 billion of Strategy's total market value may exist in the form of passive holdings through exchange-traded funds (ETFs) and mutual funds linked to major benchmark indices. The analysts warned, "If MSCI insists on going ahead with the exclusion plan, it could lead to $2.8 billion outflow for Strategy... If other index providers follow MSCI's lead and exclude the company from all other stock indices, the outflow scale could reach $8.8 billion." Data shows that since November 21st, Strategy's stock price has fallen by about 20%, and the company's market value is now close to its Bitcoin holdings market value. JPMorgan Chase recently pointed out that the negative impact of Strategy being excluded from mainstream indices has already been largely reflected in its stock price. The bank stated, "We believe that if MSCI decides to exclude Strategy, the downside impact on its stock price and Bitcoin will be limited, as this risk has been priced in excess. Conversely, if MSCI makes a favorable decision on January 15, Strategy and Bitcoin could both rebound strongly to the levels prior to October 10." JPMorgan Chase also reiterated that the volatility-adjusted Bitcoin-to-gold price model implies a theoretical price of nearly $170,000 for Bitcoin in the next 6-12 months. While this prediction is speculative, it highlights the potential upside space the bank believes exists before MSCI's ruling. Since 2020, when co-founder Michael Saylor initiated a Bitcoin acquisition plan as an inflation hedge tool, Strategy has raised billions of dollars through equities and fixed-income securities. With the stock price and Bitcoin plunging in sync, liquidity concerns are escalating, making it difficult for Strategy to raise funds through new stock issuances while also needing to pay off significant interest on financial products such as perpetual preferred shares. Strategy holds around $60 billion in cryptocurrencies but has limited cash, exacerbating market concerns about its potential sell-off of digital assets and adding to greater selling pressure on the already illiquid and weak demand fragile crypto market. Phong Le stated on Monday that if there is a need to repay debts, this Bitcoin "whale" company may sell its cryptocurrencies holdings, which subsequently triggered a Bitcoin plunge. However, Bitcoin rebounded on Tuesday and Wednesday. Traders pointed out that the Chair of the U.S. Securities and Exchange Commission (SEC) Paul Atkins's plan to announce "innovation exemptions" for digital asset companies, as well as Vanguard Group's decision to allow major cryptocurrency holding ETFs and mutual funds to trade on its platform, were reasons for the Bitcoin rebound. At the time of writing, Bitcoin was slightly down, trading at $93,113.10.