Will Michael Saylor’s Strategy Ever Join the S&P 500?

Strategy has made no secret of the fact that it would like to join the S&P 500 — but at least for now, a spot in this flagship index remains elusive.

Earlier this week, the Bitcoin treasury company was snubbed again, with Sandisk joining the ranks of America’s most prestigious large-cap companies instead.

The S&P 500 rebalances every three months — meaning Michael Saylor’s firm will get another shot at inclusion soon — but this is by no means guaranteed.

On an earnings call for its Q2 results back in October, Strategy executives wanted to make one thing clear: they’re ready to play in the big leagues.

President Phong Le argued that the company was on track for operating income of $34 billion by the end of the year — easily surpassing the likes of Walmart and Pfizer.

This would put Strategy 9th in the S&P 500’s rankings, yet at the time, it would only have been the 96th biggest in terms of market capitalization.

“There are only five companies in the S&P 500 universe that have a lower P/E multiple than us. On the one hand, we’re capitalized on the most innovative technology and capital asset in the history of mankind. On the other hand, we’re possibly the most misunderstood and undervalued stock in the U.S. and potentially in the world.”

Le noted that the S&P 500 has started to allow crypto-focused companies to become a part of its index — naming Coinbase, Block and Robinhood as examples. There are some key requirements that a stock needs to meet first. It must be based in the US, reach a minimum market cap, and show positive earnings in the most recent three-month period.

Here’s the problem though: a committee can veto inclusion even if all of these requirements are met. That’s the situation Strategy currently finds itself in, much to the frustration of executives.

“Now that we meet all the criteria, the question we get often is, why are we not included? We don’t know exactly. This is a S&P 500 process that they don’t publish exactly why someone gets added or not.”

Le went on to admit that some companies weren’t added to the S&P 500 straight away — indicating that there might be a bit of a waiting game.

Strategy’s current chances might have taken a bit of a beating. In the month that’s passed since this earnings call, its stock has now plunged by a further 35%. That’s left the business with a market capitalization of $50.9 billion — and as we’ve noted in the past, that valuation is lower than the $58 billion of Bitcoin it holds.

You could argue that the company needs to be added to the S&P 500 in order to regain a bit of momentum. Inclusion generates mandatory buying pressure as asset managers who offer ETFs tracking this index snap up stock. Volatility also diminishes thanks to an uptick in trading volumes.

Here’s the thing though: in the eyes of this flagship index, Strategy may be best categorized as a fund rather than an operating company. While it does have a software business, annual revenues of $463.5 million in 2024 — when Bitcoin activity is excluded — mean it’s nowhere big enough for the S&P 500.

Millions of investors saving for their retirement might also prefer for this stock to remain excluded indefinitely. While Strategy’s share price has been known to surge dramatically when Bitcoin is in the ascendancy, punishing drawbacks are also a threat. Would everyday consumers want this in their portfolio?

For now, Strategy is trying to put a brave face on its current financial position — stressing that it wouldn’t be plunged into jeopardy if BTC’s spot price falls below the average of $74,000 it’s paid per coin.

“In the depths of the 2022 crypto winter, our average cost basis was $30K while $BTC traded nearly 50% below it at $16K. What did we do? We bought more.”

Executive chairman Michael Saylor has also insisted that Strategy “is not a fund, not a trust and not a holding company” — issuing a statement amid rumors that the stock could be ejected from the MSCI index.

It’s unclear whether that’ll be enough to convince decision makers on Wall Street.

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