Disclaimer: The analyst who wrote this piece owns shares of Strategy (MSTR).
Strategy (MSTR) on Track for S&P 500 Inclusion by June 20?
Eligibility Requirements
Strategy (MSTR) is one step away from meeting the eligibility requirements for S&P 500 inclusion. Currently, the company meets all requirements, except for one: achieving positive GAAP net income over the trailing 12 months (the most recent four quarters combined).
FASB Digital Asset Accounting Rule
To qualify, MSTR’s Q1 2025 earnings must be high enough to offset losses from the previous three quarters. This goal could be achieved thanks to the adoption of the Financial Accounting Standards Board (FASB) digital asset accounting rule. The FASB rule change requires companies to recognize bitcoin (BTC) holdings at fair value, meaning price gains will flow through to the bottom line (as would price declines). Prior to this rule, corporate digital asset holders were required to account for holdings at their weakest levels. MSTR, for example, in the fourth quarter of 2024 still valued its bitcoin at less than $16,000 per token, leading to a $1 billion impairment loss even as bitcoin closed the year at about $94,000.
Holy Grail
According to an analysis by Richard Hass on X, assuming MSTR’s holdings don’t change between now and March 31, bitcoin must close the first quarter above $96,337 for the company to meet the positive trailing 12-month earnings requirement. "Based on Q4 2024 earnings of -$671 million in net income MSTR requires $1.113 billion in Q1 2025 earnings to produce positive earnings in the prior four quarters and become eligible for S&P 500," he wrote. "Based on MSTR’s current treasury of 478,740 BTC, the required BTC price on March 31 to achieve this is $96,337".
S&P 500 Inclusion
If bitcoin prices remain strong and MSTR continues accumulating tokens, S&P 500 inclusion is within reach. Mark Palmer, a Benchmark analyst, stated: "MSTR’s adoption of the amended FASB guidance strengthens its case for S&P 500 inclusion. Given its outperformance of every current index constituent over four years, exclusion would be surprising." "While joining the Nasdaq-100 was significant, the S&P 500 is the holy grail. Inclusion would validate its Bitcoin strategy, as all S&P 500 index funds would hold MSTR shares, indirectly exposing investors to Bitcoin."
Conclusion
MSTR’s path to S&P 500 inclusion is clear. With the adoption of the FASB digital asset accounting rule, the company is poised to meet the eligibility requirements. As bitcoin prices remain strong and MSTR continues to accumulate tokens, the likelihood of S&P 500 inclusion increases. This would be a significant milestone for the company, validating its Bitcoin strategy and providing exposure to the digital asset to a broader audience.
FAQs
Q: What is the current status of MSTR’s S&P 500 inclusion?
A: MSTR meets all S&P 500 eligibility requirements, except for achieving positive GAAP net income over the trailing 12 months.
Q: What is the FASB digital asset accounting rule?
A: The FASB rule change requires companies to recognize bitcoin holdings at fair value, meaning price gains will flow through to the bottom line (as would price declines).
Q: What is the required bitcoin price for MSTR to meet the positive trailing 12-month earnings requirement?
A: According to Richard Hass, the required bitcoin price on March 31 is $96,337.
Q: What are the implications of MSTR’s S&P 500 inclusion?
A: S&P 500 inclusion would validate MSTR’s Bitcoin strategy, providing exposure to the digital asset to a broader audience and indirect exposure to investors through S&P 500 index funds.
