S&P Dow Jones Indices has declined to add Strategy (formerly MicroStrategy) back into the S&P 500 index. The world’s most prestigious stock index has chosen SanDisk over Interpublic Group to replace MSTR.
The company’s U.S. index committee typically doesn’t explain its decisions, but the mid-quarter announcement was interesting. The decision was not consistent with the committee’s quarterly pace and included only one stock change.
Quarterly rebalancing announcements typically occur in the last month of each calendar quarter and involve multiple companies joining or leaving the index at the same time.
MSTR meets most of the criteria of the S&P 500 Index
The S&P 500 has established technical criteria for inclusion, and Founder Michael Saylor has ensured that Strategy’s MSTR common stock meets all criteria.
Despite this, the commission has refused to add MSTR for months.
To be eligible, Strategy must be domiciled in the United States, derive a majority of its revenue domestically, trade on the NASDAQ (NYSE or CBOE are also eligible), have a market capitalization in the 85th percentile of the S&P Total Market Index, have positive GAAP revenue for the most recent quarter, have traded at least 250,000 shares in the past 6 months, and have a GAAP return for the most recent four quarters. Total revenue was positive.
Despite meeting all of these quantitative criteria earlier this year, strategic management speculated about possible reasons for the index committee’s rejection.
First of all, most companies don’t get hired right away after meeting all the quantitative benchmarks the first time. The S&P U.S. Index Committee typically waits several quarters before adding.
In fact, even Tesla and many other big-name companies had to wait several quarters to join the S&P 500, despite their prominence.
Read more: Why the S&P 500 Committee may reject inclusion in the MSTR on Friday
Other possible reasons for S&P 500 delays
MSTR has not performed particularly well this year. The company’s stock price is currently down 39% compared to the beginning of 2025, and its recent performance has been particularly bearish.
After 12 months of decline, the company’s market capitalization is now less than the value of its Bitcoin (BTC) holdings.
Furthermore, Phong Le, CEO of Strategy, admitted that Strategy’s heavy reliance on BTC as an asset poses problems for inclusion in the S&P 500. While holding large amounts of BTC does not preclude approval, Strategy’s 10-Q report and other SEC filings are very different from other companies.
Strategy Inc. has recorded billions of dollars in unrealized gains on its over $48 billion in BTC purchases, a special type of asset that few other S&P 500 stocks own.
Although the filing complies with modern accounting rules, it is non-standard and may be a reason for the S&P U.S. Index Committee’s slow review of Strategy’s application to join the index.
Finally, the committee is ultimately free to exercise discretion in determining additions and deletions. Committee members are anonymous and do not typically explain their decisions.
They may assess the long-term stability of a stock’s performance, its creditworthiness to pay dividends or bonds, or other volatile metrics that are difficult to infer from public reporting about private meetings.
Although S&P Dow Jones Indices may reschedule its fourth quarter release to any date, the regular quarterly decision will likely be made after the market closes on Dec. 5, and MSTR remains eligible for adoption.
On binary options gambling website Karshi, traders are accepting bets with 8% odds that MSTR will join the S&P 500 index this year.
