Summary

  • Strategy CEO Phong Le said the impact of the company’s removal from MSCI indexes would be limited and that about 3% of its shares are tied to MSCI indexes.
  • MSCI said it will remove Strategy’s Class A shares from the MSCI USA Index, MSCI World Index and the MSCI All Country World Index (ACWI), raising the possibility of selling by index-tracking funds and weaker inflows from new investment capital.
  • Strategy has used money raised through stock and bond sales for Bitcoin purchases, and Le said concerns about changes in share demand and funding conditions stemming from the index removal were overdone.

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Strategy Chief Executive Officer Phong Le said the impact of the company’s removal from MSCI indexes will be limited.

Le told CNBC on November 13 that about 3% of Strategy’s shares are tied to MSCI indexes. That would not pose a major problem for the company, he said, and the effect should be minimal. He added that index providers should not interfere in investment decisions involving specific assets.

MSCI said in the results of its regular index review announced on November 11 that Strategy’s Class A shares will be removed from the MSCI USA Index. The change will take effect after the market closes on November 30. The stock will also be deleted from the MSCI World Index and the MSCI All Country World Index, or ACWI, which include the U.S. index.

The decision follows MSCI’s inclusion criteria for what it classifies as “non-operating companies.” MSCI has been reviewing whether companies that create value primarily through asset holdings rather than business operations remain eligible for its indexes because they can resemble investment funds. Removal from the indexes could lead to selling by funds that track them and a decline in new investment inflows.

Le said MSCI has maintained an anti-digital-asset stance for years. The index provider should act as an independent judge of the market rather than pick winners and losers, he said. He also criticized MSCI, saying it appeared to have concluded that investors should not invest in Bitcoin.

Strategy has been using funds raised through stock and bond issuance to buy Bitcoin. That has drawn attention to whether the index removal could affect trading demand for the shares and the company’s funding conditions. Le pushed back on those concerns, saying the bigger issue is why MSCI is trying to pick winners and losers in the market.

Doohyun Hwang