This article first appeared on GuruFocus.
Strategy (NASDAQ:MSTR) shares fell 3.64% to $110.24 as of 10:05 a.m. ET in Friday's regular session on November 13, as Bitcoin slid about 3% to $69,342, its first drop below $70,000 since August. The decline comes days after MSCI confirmed it will remove Strategy from its indexes after the close on November 30.
Warning! GuruFocus has detected 9 Warning Signs with MSTR.
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The index decision is the first under MSCI's new rule for companies that look more like investment funds than operating businesses. It removes Strategy from the MSCI USA, World and ACWI indexes, according to 24/7 Wall St. Strategy had estimated that about $2.8 billion of its shares could be sold as a result, and J.P. Morgan put potential outflows at up to $8.8 billion if other index providers follow. Strategy held about 848,517 Bitcoin as of October 25, bought for $64.02 billion, an average of roughly $75,446 each.
At $69,342, Bitcoin sits about 8.1% below that average cost. That matters because Strategy funds purchases by selling shares and debt, and a price below cost makes new capital harder to raise. The GuruFocus chart shows a GF Score of 67/100, with decent momentum but weak profitability and an average balance sheet for a company whose earnings swing with Bitcoin. GF Value is $111.04, almost exactly the share price, with a "Fairly Valued" label, and the shares trade at 0.84 times book value. The model sees no edge either way, which leaves Bitcoin as the deciding variable. The next test is the November 30 index deletion and whether Bitcoin holds above its August lows.
