Variables still exist as MicroStrategy joins the Nasdaq 100! Analysts debate over business scale and industry categories.

Variables still exist as MicroStrategy joins the Nasdaq 100! Analysts debate over business scale and industry categories.

Variables still exist as MicroStrategy joins the Nasdaq 100! Analysts debate over business scale and industry categories.

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MicroStrategy’s inclusion in QQQ is uncertain
Tech company or financial company?
How MicroStrategy will be affected

According to a previous report by Zombit, MicroStrategy, a US-listed company famous for its investment in Bitcoin, has met all the requirements for inclusion in the Nasdaq 100 Index. This could potentially lead to its inclusion in the ETF during this month’s annual rebalancing, triggering a $2.1 billion stock purchase.

However, Bloomberg reports that market observers are considering the possibility that the company may be excluded from the annual rebalancing. This is because MicroStrategy’s stock price has surged solely due to leveraged bets on Bitcoin, but it remains a small software company. Many believe that it should not be included in the Nasdaq 100.

In response, TD Cowen analyst Lance Vitanza defends MicroStrategy, claiming that the idea of the index is to reflect the true state of all stocks in the market. He rates MicroStrategy as a “buy” and believes that any large company, including MicroStrategy, that occupies a significant portion of the Nasdaq market should be reflected in the index.

However, Lance Vitanza emphasizes that Nasdaq could still use the “small scale of MicroStrategy’s business” as a reason for not including it in the index.

Currently, MicroStrategy is primarily classified as a tech company in the software business, meeting the inclusion criteria for the Nasdaq 100. But Bloomberg Intelligence analyst James Seyffart suggests that ICB may reclassify MicroStrategy as a financial stock in the next change in March next year, which would be unfavorable for MicroStrategy as financial companies do not qualify for the Nasdaq 100.

Michael Lebowitz, portfolio manager at RIA Advisors, states that MicroStrategy now resembles more of a commodity or ETF because it is essentially a “Bitcoin or bust” company. He believes it should be reclassified as a financial company next year. In an interview, Michael Lebowitz said:

“100% of the company’s value comes from Bitcoin, and the rest might be negative. A large part of the company is its Bitcoin holdings and the surrounding financial operations, so it is a financial company.”

If the company is included in the index, the increase in its trading volume may not significantly affect its liquidity, but it will attract new investors, says TD Cowen analyst Lance Vitanza:

“If you consider the liquidity of this stock and the number of shares traded, it is not that much. But it will bring in new capital, so I think the people who ultimately own this stock are clearly different from those who buy stocks at market prices.”