MicroStrategy, the world's largest corporate holder of Bitcoin, is facing a significant risk of being removed from major equity indices, including the MSCI USA Index, as highlighted in a new JPMorgan note.
The company's stock has declined by 40% over the past month and is 68% below its record high, with concerns arising due to its significant Bitcoin holdings.
MicroStrategy's Bitcoin Position
MicroStrategy holds 649,870 Bitcoin at an average purchase price of $74,433, with the potential for the value to turn negative if Bitcoin drops by another 15%.
Structural Pressure Point
The company's unique 'Bitcoin-on-Nasdaq' model has faced challenges as Bitcoin's value dropped, leading to a collapse in the market-implied net asset value and limited opportunities for issuing high-priced equity.
JPMorgan's Warning and Potential Impact
JPMorgan's research note highlights the risk of MicroStrategy's exclusion from major equity indices, which could lead to outflows of billions of dollars and trigger forced selling from passive index funds.
Analyst Insight and Price Target
Despite the concerns, a top Bernstein analyst maintains a positive outlook on MicroStrategy, reiterating a Buy rating with a $600 price target, suggesting a potential 238% upside.
- The warning from JPMorgan and the potential delisting risk have led to increased concerns among investors, with MicroStrategy's stock price showing a sharp decline in recent weeks.
- The company's heavy reliance on Bitcoin and the possibility of exclusion from equity indices indicate a challenging road ahead for MicroStrategy.
MicroStrategy faces a critical juncture with the risk of delisting from major equity indices looming large. The company's strategic reliance on Bitcoin and the market's response to its structural risks are key factors driving the current market sentiment.