A Major Reconstitution
MicroStrategy Inc. (MSTR) is set to join the Nasdaq 100 index, prompting a significant reconstitution of the index. This change, based on market cap rankings as of November 29, will take effect after December 20.
The inclusion of MicroStrategy, with its $94 billion market cap, will impact passive funds tracking the index, such as the Invesco QQQ Trust (QQQ) and the Invesco Nasdaq 100 (QQQM). These funds, along with the Global X Nasdaq 100 Covered Call (QYLD), will need to adjust their holdings to include MicroStrategy by December 20.
MicroStrategy's entry into the NASDAQ 100 introduces Bitcoin exposure to passive investors, as the company holds nearly 2% of the Bitcoin supply. Known for issuing stock to purchase Bitcoin, MicroStrategy's strategy could affect the index's dynamics.
The reconstitution may result in increased turnover and potential tracking errors for ETFs, as they will need to rebalance their portfolios to accommodate MicroStrategy's growing market cap. This unique situation could lead to strategic trading opportunities for investors.
MicroStrategy's potential inclusion in the NASDAQ 100 is a testament to its growing influence in the financial markets, particularly due to its aggressive Bitcoin strategy. Bernstein recently described MicroStrategy as a "Bitcoin magnet," projecting it could hold 4% of the global Bitcoin supply by 2033. However, this strategy is not without risks, as some analysts caution about its long-term viability.
Michael Saylor, co-founder of MicroStrategy, recently revealed that the company is generating substantial profits from its Bitcoin holdings, reportedly making $500 million a day as Bitcoin nears $100,000. This has contributed to a surge in MicroStrategy's stock, which has increased by 465% year-to-date, significantly impacting ETFs linked to its performance.
MicroStrategy's recent $3 billion offering of 0% convertible senior notes, completed swiftly, underscores investor confidence in its strategy. These notes offer no interest but allow participation in the equity upside, reflecting the market's appetite for exposure to MicroStrategy's Bitcoin-driven growth.