Michael Saylor’s Strategy could be the next crypto company to join the S&P 500 stock market index, a benchmark of the 500 biggest US public companies by market capitalization, according to analysts. The company must still clear hurdles before being admitted, however.
Market analyst Jeff Walton forecast a 91% chance that Strategy would join the index as the company moves toward meeting all the requirements to be included in the benchmark.
According to data from Nasdaq, Strategy has trading volumes of several million shares per day, a market capitalization of over $92 billion at time of writing and positive generally accepted accounting principles (GAAP) net income over the last four quarters of over $5.3 billion.
Strategy’s financial metrics exceed the eligibility criteria for inclusion in the S&P 500 stock market index. Source: Yahoo Finance
Strategy is listed on the Nasdaq 100, an index that tracks the 100 largest companies by market capitalization listed on the tech-focused Nasdaq stock exchange.
However, despite the company meeting all the requirements and already being included in a major stock market index, it may still be denied inclusion if the committee tasked with evaluating companies rules against adding it after taking a “holistic” view of the prospective candidate.
The US Index Committee still gets the final say
According to S&P Global methodology, companies must have a market capitalization of at least $22.7 billion, a liquidity ratio of 0.75 or more — the annual trading volume divided by the company’s market cap — and a trading volume of at least 250,000 shares per month to be eligible.
The sum of a company’s net income, calculated through GAAP standards over the last four quarters must be positive, with the most recent quarter being profitable for inclusion in the index.
The US Index Committee is in charge of adding new companies to the index, and has 10 voting committee members, each with equal voting rights. Decisions by the committee are made using a simple majority vote.
Strategy, which is the world’s largest Bitcoin (BTC) treasury company by holdings, currently holds 636,505 BTC in its corporate treasury, according to BitcoinTreasuries, while over 1 million BTC is collectively held by publicly traded companies.
According a report from Bloomberg on Thursday, possible challenges for a pass by the committee would include the sustainability of Strategy’s crypto treasury model and high stock volatility. Strategy’s 30-day price swings average 96%, for example.
The S&P 500 stock market index has steadily risen since 1990. Source: Yahoo Finance
Impacts on the crypto market and challenges
The S&P 500 is a weighted stock market index of the of the largest 500 companies by market capitalization listed on the US stock market and is rebalanced on a quarterly basis to reflect changes in the makeup of the index.
Companies featured in the S&P 500 index attract passive flows into the crypto markets, helping boost prices over time, while also further intertwining digital assets and legacy financial markets.
Related: Robinhood, Strategy shares dip as they miss out on S&P 500 inclusion
Coinbase became the first crypto company to be included in the S&P 500 index, landing on the benchmark in May.
Block, a technology company founded by Jack Dorsey, was bumped up to the index in July and has a market cap of over $46 billion as of time of writing.
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