MicroStrategy has made its mark by joining Nasdaq-100, but the goal of conquering the S&P 500 – the 'holy grail' of the stock market – remains distant due to profit barriers.
Main barrier: Profits do not qualify
According to the criteria of the S&P 500, companies must have positive earnings in the most recent quarter and accumulate positive earnings over 4 consecutive quarters. However, #microstrategy only achieved profit in 1 out of the last 4 quarters, making the company ineligible for membership.
Impact from Bitcoin and new opportunities
Despite owning a massive portfolio worth over $44 billion (423,650 BTC), this is not the main reason hindering MicroStrategy. Instead, the issue lies in how Bitcoin's value is recorded under current accounting regulations, as this digital asset is only accounted for at the lowest price since purchase.
However, starting from January 2024, the new FASB regulation will allow MicroStrategy to assess Bitcoin at its actual market value. With Bitcoin priced near $100,000, this could significantly improve the company's profit reporting.
Other challenges: Nasdaq review
MicroStrategy's inclusion in #nasdaq100 starting December 23 is a major victory, placing the company's stock in large funds like QQQ with over $250 billion in assets. However, due to holding a large amount of Bitcoin, the company may be reclassified as a financial company during the upcoming March review, posing the risk of being removed from Nasdaq-100.
Conclusion
Although MicroStrategy is leveraging Bitcoin to achieve a valuation near $100 billion, the path to #S&p500 still faces many challenges. Improving profits and adapting to new regulations will be decisive factors in the company's future.
