Strategy’s stay of exclusion – Financial Times

Last summer, a listed Japanese hotel company called Metaplanet sold $1.45bn of shares and ploughed the cash into bitcoin. MSCI, one of the world’s biggest providers of financial indices, was unimpressed.

Michael Saylor’s MicroStrategy was the pioneer of the so-called “Digital Asset Treasury Company” trend, but Metaplanet’s splurge seemed to hammer home how broad and distortive the phenomenon was becoming. When it comes to index inclusion, should giant crypto wallets with small hotel or software businesses attached really be treated as “normal” companies?

MSCI launched a consultation in September “to gather market feedback on the appropriate treatment of companies whose primary business involves Bitcoin or other digital asset treasury activities”. In October, this became a formal proposal to eject these companies from its indices. Yesterday we finally got the result:

MSCI has determined at this time not to implement the proposal to exclude digital asset treasury companies (“DATCOs”) from the MSCI Global Investable Market Indexes (“MSCI Indexes”) as part of the February 2026 Index Review. 

. . . For the time being, the current index treatment of DATCOs identified in the preliminary list published by MSCI of companies whose digital asset holdings represent 50% or more of their total assets will remain unchanged: – DATCOs currently included in MSCI Indexes will continue to be included, provided they continue to meet all other index inclusion requirements.

Metaplanet shares popped on the news, as did those of a host of other “Datcos”. But the biggest winner was Strategy, for which an ejection from various MSCI indices would probably have deepened its slide since the summer. As it stands, pre-market trading implies that Strategy’s shares are poised to gain 4 per cent when trading starts up in the US.

Look, even for salty, perennially poor nocoiners like Alphaville, MSCI punting the decision doesn’t seem entirely unreasonable. At least superficially so.

Index companies are increasingly aware of the immense sway they now enjoy over markets. The growth of passive investment funds — and the growing benchmark awareness of almost all investors — has transformed indices from simple snapshots that aim to reflect markets to something that can actually influence them. Index providers are therefore loath to do anything potentially disruptive.

JPMorgan had previously estimated that MSCI exclusion could have triggered $2.8bn of forced selling of Strategy shares. If this had happened into an already weak market, it could have gotten very ugly. Craig Coben argued last year that it could even be “existential”.

This is why Strategy itself had plaintively argued to MSCI that it should hold off on its proposal, insisting that it was no different from real estate investment trusts or even oil companies, which also just invest in single asset classes:

The proposal’s digital-asset-specific 50% threshold is discriminatory, arbitrary, and unworkable. The proposal’s 50% rule arbitrarily singles out digital asset businesses for uniquely unfavorable treatment, while leaving untouched businesses in other industries(such as oil, timber, gold, media and entertainment, and real estate) that have similarly concentrated holdings in a single asset type.

And there is no way to implement the proposed 50% rule consistently or fairly. Asset price swings, changes in the application of accounting principles, and other factors relevant to balance sheet accounting would lead to index instability as DATs whipsaw on and off MSCI’s indices.

Despite the letter mostly banging on about the “emerging financial system” that Strategy argues it exemplifies (and the Trump administration’s endorsement of it), this last point was its strongest.

The major index providers are indeed loath to be the cause of market turbulence — or even be seen to be directing investment flows. Strategy’s letter subtly preyed on this: “By discriminating against one asset type, the proposal would transform MSCI into an arbiter of investment decisions — creating confusion and undermining the representativeness and reliability of its indices,” Strategy argued.

When MSCI first made its proposal, it was widely believed that DATs would be ejected. Indeed, this looming danger was at least one of the drivers behind Strategy’s late 2025 slide. But the crypto industry’s lobbying seems to have won through. As TD Securities’ index products head Peter Haynes said in a note:

Over the course of this debate, we moved our prediction from highly likely to be removed at the outset to 50/50 by the end of the year based on the educational work of the industry. In the end, MSCI decided it was, in fact, too hasty in its proposed rulemaking and has decided to pause pending further, more-detailed analysis of eligible companies.

Nonetheless, MSCI’s decision still looks more like a tactical pause than a full retreat.

Its announcement stressed that this was a postponement to allow for “a broader consultation on the treatment of non-operating companies generally”. In other words, while Strategy’s laughable argument that it is no less diversified than ExxonMobil was discounted, MSCI is planning to have a big think about how it should treat all listed entities that are primarily investment vehicles rather than traditional operational businesses.

This broader review is intended to ensure consistency and continued alignment with the overall objectives of the MSCI Indexes, which seek to measure the performance of operating companies and exclude entities whose primary activities are investment-oriented in nature. 

Feedback from the consultation confirmed institutional investor concern that some DATCOs exhibit characteristics similar to investment funds, which are not eligible for inclusion in the MSCI Indexes. Feedback also highlighted that DATCOs may represent a subset of a wider group of entities whose business activities are predominantly investment-oriented rather than operational.

Distinguishing between investment companies and other companies that hold non-operating assets, such as digital assets, as part of their core operations rather than for investment purposes requires further research and consultation with market participants. For instance, assessing index eligibility across a range of these types of entities may require additional inclusion assessment criteria, such as financial-statement-based or other indicators.

This would seem to open up REITs and other investment trusts up for exclusion. However, while a broad review makes sense, there’s very little chance of anything dramatic happening here.

If MSCI is wary of ejecting Strategy and its ilk it’s not going to change the index treatment of about $1.5tn worth of REITs listed in the US. It will instead probably end up formulating some complicated rules and methodologies that in practice get it back to its initial position that DATs have no place in big mainstream stock market indices.

TD’s Haynes reckons that any changes would now be so far off that Strategy et al can still relax.

We believe this announcement will lower the temperature on the DATCOs in terms of the potential worst-case scenario of removal from all major benchmark providers.

We expect MSCI will take 6-12 months to complete a more fulsome review of its index eligibility requirements and S&P and FTSE-Russell to review rules in parallel. After all, index users, who are often common amongst the three providers, do not likely want to see one provider act in a different manner than the others.

DATCOs will remain an important topic for 2026 but for now the index removal heat is off this sector.

Still, this is a reprieve, not a redemption. If S&P Dow Jones and FTSE Russell — the other two members of the indexing world’s Big Three — also announce similar moves, then the heat will still be there, albeit at a lower simmer (S&P has already refused to admit Strategy to the S&P 500)

Meanwhile, Strategy has had to sell common stock just to have enough cash at hand to pay dividends promised to preferred stockholders. Coupon payments on its convertible bonds are another cash drain, and next year some of its debt will — barring an epic recovery in the price of bitcoin and Strategy’s shares — have to be repaid.

In other words, by the time MSCI and the other index providers stop dawdling, the whole issue could have become moot.

Further reading:
— Bitcoin treasury companies are an auditor’s nightmare (FTAV)
— ‘Infinite money glitch’; meet arithmetic (FTAV)
— Introducing P/BYD, an exciting new way to rationalise nonsense (FTAV)