MicroStrategy Set to Join the Prestigious Nasdaq-100 Index: What This Means for the Company's Stock

The co-author of this article holds shares in MicroStrategy. Despite the unusual trends in cryptocurrency investing in 2024, exchange-traded funds have emerged as a major story. This narrative, which began with the launch of bitcoin and ether ETFs, may not be over yet. Following a sixfold increase in its stock price this year, MicroStrategy, a bitcoin investment firm led by Michael Saylor, appears poised to join the $312 billion Invesco QQQ ETF, which tracks the Nasdaq-100 Index. Every December, Nasdaq updates the membership list for this benchmark, which is then reflected in the Invesco fund. The Nasdaq-100 Index roughly tracks the 100 largest non-financial companies listed on the Nasdaq exchange, with additional eligibility criteria that MicroStrategy meets. According to James Seyffart, an ETF analyst at Bloomberg Intelligence, 'The index is passive and rules-based, so it should follow the rules. The market indicates that MSTR belongs in the index and the ETF, and therefore it should be added.' This development would convey more than just prestige; it would mean membership in an exclusive club alongside giants like Nvidia, Apple, and Microsoft in an ETF that regularly boosts daily trading volume in the tens of billions of dollars, guaranteeing passive and permanent capital inflows. As Jeff Park, head of alpha strategies at Bitwise, noted, 'Getting added will open up flows to a new class of investors that would not otherwise have singularly bought a stock like MSTR on their own.' The decision would also essentially increase bitcoin's presence in the index, as Saylor has accumulated a $37 billion stockpile of bitcoin over the past four years, transforming his decades-old software firm into one of the largest crypto investors globally. For millions of passive investors, owning ETFs like QQQ will provide indirect bitcoin exposure through MicroStrategy's holdings. This is technically theoretical, as Nasdaq will announce its decision on December 13, with the membership changes taking place a week later. Among eligible companies, MicroStrategy is the 66th-largest by market capitalization, according to Seyffart, which likely translates to over $1 billion in new money coming into the stock. A potential complication is whether the Nasdaq committee will still consider MicroStrategy a non-financial company, given its significant shift towards bitcoin investment. If MicroStrategy joins the index, the resulting impact could preview what might happen if the stock becomes large enough to join the S&P 500 Index in early 2026. Entering an index can be extremely beneficial for a publicly traded company, but the question remains whether the majority of returns occur before or during the company's time in the index.