MSCI Drops Strategy From Its Global Indexes, Effective After Nov. 30

Strategy is coming out of MSCI's flagship stock indexes. The index provider will delete the bitcoin-holding company from the MSCI USA Index at the Nov. 30 close, Reuters reported Wednesday, after deciding that companies like it look more like investment funds than operating businesses.

Index funds don't get a say in this. A fund that tracks an MSCI benchmark has to hold what's in it and sell what leaves, so a deleted stock loses a built-in group of buyers. J.P. Morgan had estimated that outflows from Strategy stock could reach $8.8 billion if other index providers follow MSCI, Reuters reported.

Metaplanet and Yellow Cake are out too

MSCI's November review deletes 100 securities from the MSCI ACWI Index, its all-country benchmark, with every change taking effect as of the Nov. 30 close, its announcement shows. Tokyo-listed Metaplanet, another bitcoin buyer, leaves the MSCI Japan Small Cap Index, and UK uranium holder Yellow Cake is also on the deletion list, according to Reuters and Blockhead. Ether treasury company SharpLink landed on MSCI's watchlist instead.

Strategy's shares fell about 2.5% in extended trading on Wednesday.

How MSCI's new test works

This is the first review under MSCI's rule for what it calls non-operating companies. A company first has to show that more than half of its assets are operating assets; if it can't, it faces five financial measures. A company already in an index is removed only after failing that screen in its two most recent annual filing periods, Blockhead and The Block reported. MSCI's review documents gave no company-specific reasons.

Strategy argued against the rule

Strategy, Metaplanet and Yellow Cake did not immediately respond to Reuters' requests for comment. In a letter to MSCI earlier this year, Strategy said deletion would do little to its business, Blockhead and The Block reported. Leaving an index doesn't require Strategy to sell any bitcoin.

Bitcoin was near $73,680 at 11:59 p.m. ET Wednesday, roughly flat over 24 hours, per CoinGecko.

In our opinion: the date to circle is Nov. 30, when tracking funds have to finish selling. Strategy says the exit will do little to its business, and J.P. Morgan's $8.8 billion figure depends on other index makers copying MSCI, so the next provider to rule on treasury companies is the real test. Being called a fund by the people who build funds is an odd sort of compliment.