TLDR
- Strategy has officially entered formal negotiations with MSCI regarding its status in the MSCI Index.
- Michael Saylor confirmed that the talks are underway ahead of MSCI’s scheduled review on January 15.
- Analysts warn that Strategy’s removal from the MSCI Index could lead to $8.8 billion in potential outflows.
- Saylor disagreed with the projected outflow estimates and said current market conditions do not support that forecast.
- The company has set aside a $1.44 billion reserve to cover debt interest and dividends on preferred stock.
Strategy has officially started discussions with index provider MSCI over its future in the MSCI Index. Michael Saylor confirmed the talks as the firm faces pressure from index reclassification reviews. The company seeks to influence MSCI’s decision before the scheduled January 15 review.
Strategy Opens Talks With MSCI Over Index Position
Strategy confirmed that it is now engaging directly with MSCI regarding its current standing in the MSCI Index. Chairman Michael Saylor said the firm is “actively engaging” with MSCI ahead of the index provider’s review. He noted the review focuses on companies with large digital asset exposure.
This development comes after MSCI and Nasdaq began reviewing firms tied heavily to digital tokens in late November. Strategy holds more than half its assets in Bitcoin, drawing attention under the review criteria. Saylor responded by defending the company’s model and market alignment.
He stated, “The equity is designed to move more sharply than Bitcoin,” citing the firm’s leveraged Bitcoin structure. Strategy’s volatility remains high as Bitcoin recently crashed from its October high above $120,000. The firm’s equity has tracked those moves with heightened sensitivity.
Saylor Challenges Outflow Forecasts, Market Outlook Weakens
Analysts say removal from the MSCI Index may trigger $8.8 billion in outflows if others follow MSCI’s decision. However, Saylor pushed back on this forecast, saying he is “not convinced” it reflects current market trends. The company maintains its model despite the recent crypto downturn.
Shares of Strategy have fallen nearly 40% since January following a sharp decline in Bitcoin and digital assets. Its leveraged ETFs have also seen steep declines, with two long funds dropping over 85% this year. Inverse products dropped as Bitcoin fell below $90,000 in recent weeks.
JP Morgan noted that continued weakness could raise doubts over Strategy’s ability to raise funds in turbulent markets. The company’s modified net asset value is now under scrutiny due to the asset volatility. CEO Phong Le earlier warned that Bitcoin may be sold to protect capital ratios.
Strategy Sets $1.44B Reserve, Schiff Calls Model Broken
To ease pressure, Strategy announced a $1.44 billion reserve to pay dividends and meet debt interest obligations. This came as concerns mounted over the firm’s liquidity and potential asset sales. The company stressed this reserve would help stabilize operations and protect its preferred stock.
Saylor also previously dismissed the relevance of index labels to the company’s core strategy. He reiterated that “index classification does not define the company.” Strategy appears determined to stay focused on its core Bitcoin exposure regardless of the MSCI Index review outcome.
Critic Peter Schiff stated that Strategy’s sale of equity exposed a flawed financial model. He claimed the firm’s reliance on stock sales shows unsustainable operations. He described it as “the beginning of the end” for the company.
Strategy now awaits MSCI’s final decision expected by January 15. The outcome may impact future listings in other MSCI Index-linked funds. The company remains in talks as pressure from both equity and crypto markets continues.
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