Disclaimer: The analyst who authored this article holds shares of Strategy (MSTR)
Strategy (MSTR) appears to be on the verge of potentially being included in the S&P 500 by June 20.
At present, the company complies with all eligibility prerequisites, with one exception: it must achieve positive GAAP net income over the last 12 months (the sum of the most recent four quarters). For acceptance, the earnings for Q1 2025 need to be sufficiently high to counterbalance the losses from the past three quarters—an objective that might be attainable due to the compulsory adoption of the Financial Accounting Standards Board (FASB) accounting rule for digital assets.
The FASB regulation mandates that companies recognize their bitcoin (BTC) assets at fair value, which means any price appreciation will positively impact their net income (as would price depreciation). Before this rule was enacted, corporations holding digital assets had to value these assets at their lowest points. For instance, in the fourth quarter of 2024, Strategy valued its bitcoin at under $16,000 per token, resulting in a $1 billion impairment loss, even as bitcoin concluded the year at approximately $94,000.
Holy Grail
As per an analysis by Richard Hass on X, if Strategy’s holdings remain stable up until March 31, bitcoin must end the first quarter above $96,337 for the company to meet the positive earnings requirement for the trailing 12 months. “With Q4 2024 showing a net income of -$671 million, MSTR would need $1.113B in earnings for Q1 2025 to achieve positive earnings over the previous four quarters and qualify for the S&P 500,” he stated. “With MSTR’s current treasury of 478,740 BTC, the necessary BTC price on March 31 to meet this benchmark is $96,337.”
If bitcoin prices remain robust and MSTR continues to accumulate tokens, inclusion in the S&P 500 is feasible. Analyst Mark Palmer from Benchmark remarked:
“MSTR’s compliance with the revised FASB guidelines bolsters its case for S&P 500 inclusion. Given its superior performance compared to every existing index member over the past four years, its exclusion would be unexpected.”
“While joining the Nasdaq-100 was a notable achievement, the S&P 500 is the ultimate objective,” Palmer added. “Inclusion would affirm its Bitcoin strategy, as all S&P 500 index funds would hold MSTR shares, thereby indirectly exposing investors to Bitcoin.”
Disclaimer: Richard Hass’s initial post on X was made prior to Strategy’s last bitcoin acquisition. CoinDesk has reached out for updated analysis that includes the acquisition made on Monday.
