Written by: 1912212.eth, Foresight News
MicroStrategy has officially been included in the Nasdaq 100 index, which will take effect before the market opens on Monday, December 23. This also makes MicroStrategy the first crypto company in the crypto industry to be included in the Nasdaq 100 index.
Subsequently, MicroStrategy's chairman Michael Saylor predicted that Bitcoin mining company MARA would be the next crypto company to be included in the Nasdaq 100 index.
The strict criteria for including crypto companies in indices reflect the growing acceptance of the traditional financial technology industry. From going public to being included in the index 100, crypto companies may spark a wave of imitation.
The wave of crypto companies going public in the U.S.
The U.S. remains the world's leading technology power, and U.S. stocks hold an important position in the global stock market. The expansion effect of the crypto industry typically gains widespread dissemination through listings in the U.S. The listing of crypto companies on Nasdaq also positively influences the legitimacy, capital acquisition, and liquidity of these companies.
The listing process and requirements in the United States often follow high standards. For companies applying for IPOs, there are very specific requirements and regulations regarding their recent company revenues, market capitalization, market makers, corporate governance, financial reporting, and compliance reviews.
Since 2020, various entities in the crypto market, including mining companies, exchanges, and crypto wallets, have gone public. Among exchanges, Coinbase went public on Nasdaq in April 2021. The Japanese brokerage and crypto exchange operator Monex Group also listed its subsidiary Coincheck Group N.V. on December 11.
In terms of mining companies, this includes CleanSpark, Mara Digital Holdings, and Riot Platforms. In the field of crypto wallets, Exodus Movement went public on the NYSE on December 18.
It is worth noting that some companies did not start in the crypto industry when they went public initially, but later transitioned into the crypto sector, such as Riot Blockchain and MicroStrategy.
In addition to the aforementioned crypto companies going public, other companies currently preparing for an IPO include Bitcoin financial services company Fold, DeFi Technologies, and online brokerage eToro.
The US exchange Kraken appointed a new CFO, Stephanie, in November this year, with its CEO stating they are preparing for an IPO. Circle's CEO also expressed in an interview this October that they have long aspired to go public, and this vision remains unchanged.
In every cycle, many crypto companies officially go public, and by 2025, with the ongoing push for compliance and influence, more crypto companies may emerge and go public in the U.S.
Nasdaq 100 Index
Following their official listing, the Nasdaq 100 index has become a stepping stone for crypto companies to gain further influence and recognition.
The Nasdaq 100 Index is a stock index launched by the Nasdaq Stock Exchange, comprising the 100 largest non-financial companies listed on the Nasdaq. This index reflects the overall market performance of these companies and is one of the key indices that global investors pay attention to.
Being included in the Nasdaq 100 index means that the market has met its stringent standards for market capitalization, stock liquidity, financial profitability, compliance, and more.
In recent years, MicroStrategy has won its ticket for inclusion through its coin hoarding strategy and impressive profit levels.
Since 2020, MicroStrategy has been making BTC its primary reserve asset. With MicroStrategy's aggressive buying, the company's stock price has surged alongside Bitcoin's strong rise in this new cycle. In January 2023, MSTR's stock price was only $150, while in March 2024, the stock price soared to a high of $1999.99, with a market capitalization of several hundred billion dollars. In just over a year, its stock price return has exceeded 1000%. On December 18, Michael Saylor announced that MicroStrategy's financial operations this quarter brought shareholders a net gain of 116,940 BTC, with a yield of 46.4%. Based on a price of $10,000 per Bitcoin, the net gain for this quarter is approximately $12.28 billion.
Not only do its stock price and profitability stand out, but its market capitalization also hovers around hundreds of billions, making it one of the few publicly listed crypto companies with a market cap exceeding $100 billion.
Furthermore, after being officially selected for the Nasdaq 100 index, it is also officially classified not as a financial stock, but rather categorized as a tech stock based on its primary business of 'Software as a Service'.
MicroStrategy initially focused on providing business intelligence (BI), mobile software, and cloud-based services. Its main competitors include SAP AG's Business Objects, IBM Cognos, and Oracle Corporation's BI platform. According to its 2020 financial report, MicroStrategy's annual revenue was $480 million. Since it began massive investments in Bitcoin in 2020, MicroStrategy has gradually been seen as a Bitcoin concept stock, and its main revenue stream has also been affected by Bitcoin investments, although its core business remains software and services.
For the crypto industry, the influence of the Nasdaq 100 may also inspire more companies to follow MicroStrategy and join the ranks of Bitcoin investments.
MARA, the next crypto company to be included in the Nasdaq 100?
Bitcoin mining company MARA has become the next company to be closely watched for inclusion in the Nasdaq 100.
Similar to MicroStrategy's style, in recent months, MARA has raised several hundred million dollars through the issuance of convertible limited notes to continuously increase its Bitcoin holdings. However, getting selected for the Nasdaq 100 index poses significant challenges.
Although MARA is classified as a non-financial company, its profitability and liquidity meet certain requirements, it still lags far behind MicroStrategy in terms of market capitalization. Generally speaking, companies included in the Nasdaq 100 tend to have higher market capitalizations, and companies must reach a certain scale to be included in the top 100.
As of now, MicroStrategy's market value is over $90 billion, while MARA's market value fluctuates around $8 billion, with a difference of more than 10 times between the two.
To join the Nasdaq 100 index, new companies must remove other companies. While MicroStrategy is one of the three new companies, Illumina ($22.7 billion), Super Micro Computer ($19.8 billion), and Moderna ($15.7 billion) will be removed.
Currently, the three companies that are about to be removed all have market capitalizations exceeding $15 billion, which is still more than double MARA's market capitalization, casting a shadow over its inclusion.
MARA is still quite far from the Nasdaq 100 index, but perhaps in the near future, MARA will be selected based on its data performance.
How far is it from the S&P 500 index?
The S&P 500 includes the 500 largest companies in the United States, covering about 80% of the total market capitalization of the U.S. stock market. The selection of constituent stocks is based on market capitalization, liquidity, profitability, and industry representation. The S&P 500 is considered a benchmark for the health of the U.S. economy and the performance of large-cap stocks.
In comparison, the selection criteria for the Nasdaq 100 and the S&P 500 share similarities, such as high requirements for market capitalization and stock liquidity. However, the Nasdaq 100 emphasizes technology and innovation industries more and serves as an important indicator of growth-type investments.
The S&P 500 also emphasizes financial stability and profitability, which are relatively high standards for mining companies and crypto companies with a coin hoarding strategy.
As is well known, the four-year cyclical nature of the crypto industry is still evident, and when the market is in a bull cycle, companies often see significant profits in their accounts. However, once the cycle shifts into a bear market and prices decline, it can have a substantial negative impact on mining operations and companies holding Bitcoin as assets. Some companies may even suffer severe setbacks due to cash flow issues.
In summary, the selection criteria for the S&P 500 may generally be higher because it considers not only market performance but also strict financial health and industry diversity requirements. The Nasdaq 100 focuses more on market performance and innovation, and the selection process is relatively more automated, but for companies in specific industries, inclusion may mean higher market recognition.
The company meets the minimum market capitalization and trading volume requirements for the S&P 500 index, but currently does not meet other criteria: total positive earnings for the past four consecutive quarters.
Benchmark stock analyst Mark Palmer analyzed, 'MicroStrategy plans to adopt the new Financial Accounting Standards Board (FASB) guidelines in the first quarter of 2025 to account for its Bitcoin held on the company's balance sheet, which will allow it to start reporting positive earnings immediately.'
Since launching its Bitcoin acquisition strategy in August 2020, MicroStrategy has incurred a cumulative impairment loss of $3.1 billion. In December last year, the FASB released new guidelines allowing companies holding digital assets on their balance sheets to measure these assets at fair value and record the changes in net income at fair value for each reporting period. The new rules will take effect on January 1, 2025.
Palmer continued to analyze that 'MSTR is expected to achieve a one-time growth in quarterly net income of billions of dollars in the first quarter of 2025, which will equal the difference between the recorded value of its Bitcoin on the books and its market value. If it turns out that the net income growth is sufficient to produce positive numbers over the past 12 months, coupled with MSTR's losses in the first three quarters, the company will meet the S&P 500 criteria before the second rebalancing of the index in June, which is scheduled for the third Friday of the month.'
If market conditions remain favorable, MicroStrategy may have the opportunity to be included in the S&P 500 index again in June next year, achieving a dual success of being in both the Nasdaq 100 and the S&P 500.
