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MicroStrategy included in QQQ Variable
Tech Company or Financial Company?
Impact on MicroStrategy
According to Zombit’s previous report, MicroStrategy, a U.S. publicly traded company known for its investment in Bitcoin, has met all the conditions for inclusion in the Nasdaq 100 Index. This could potentially lead to its inclusion in the ETF in this month’s annual restructuring, triggering a stock acquisition of about $2.1 billion.
However, according to Bloomberg, market observers are considering the possibility that the company may be excluded from the annual restructuring. This is because MicroStrategy’s stock price has soared purely based on leveraged bets on Bitcoin, but it is still just a small software company. Many believe it should not be included in the Nasdaq 100.
In response to this, TD Cowen analyst Lance Vitanza spoke out for MicroStrategy, claiming that the index’s concept is that it should truly reflect the state of all stocks in the market. He rates MicroStrategy as a “buy” because he believes that any large company (including MicroStrategy) that plays an important role in the Nasdaq market should be reflected in the index.
However, Lance Vitanza emphasized that Nasdaq can still use “MicroStrategy’s business scale is too small” as a reason for not including it in the index.
MicroStrategy’s main business is still classified as a tech company, with software business as its main focus, meeting the inclusion criteria for the Nasdaq 100 Index. However, Bloomberg Intelligence analyst James Seyffart stated that ICB may reclassify MicroStrategy as a financial stock in the next change in March next year, which would be disadvantageous for MicroStrategy as financial companies do not qualify for the Nasdaq 100.
Michael Lebowitz, portfolio manager at RIA Advisors, stated that MicroStrategy now resembles more of a commodity or ETF because it is essentially a company that would “die without Bitcoin.” He believes it should be reclassified as a financial company next year. Michael Lebowitz said in an interview:
“The company’s value is 100% tied to Bitcoin, as the rest could be negative. A big part of the company is its Bitcoin holdings and surrounding financial operations, so it is a financial company.”
If the company is included in the index, the increase in its trading volume may not have a significant impact on its liquidity but would attract new investors, according to TD Cowen analyst Lance Vitanza:
“When you consider the liquidity of this stock and the number of shares traded, it’s not a lot. But it will attract new funds, so I think the people who ultimately own this stock are clearly different from those who buy it at market prices.”
