Strategy Faces Critical Index Exclusion Threat

The publicly-traded company known as the world’s largest corporate buyer of Bitcoin is confronting what may be its most significant challenge. Strategy could be removed from major MSCI indices, an event analysts warn might trigger a devastating downward spiral for its shares. JPMorgan estimates the potential capital outflow at a staggering $8.8 billion. This threat compounds an already severe share price decline, with the stock down more than 60% since July and over 40% year-to-date.

The Looming MSCI Decision

Index provider MSCI is set to announce by January 15, 2026, whether Strategy will be ejected from its Global Investable Market Indexes. A proposed new rule would exclude firms whose digital assets constitute more than 50% of total assets. Should MSCI proceed, the change would be implemented in February.

The implications of exclusion are profound:
* Passive investment funds tracking MSCI indices alone could pull out $2.8 billion.
* An additional $6 billion might exit if other index providers adopt similar rules.
* Institutional investors would be forced to sell, creating a massive wave of selling pressure.
* The loss of index membership would strip the company of a key quality endorsement.

In a 12-page letter of protest, Executive Chairman Michael Saylor and CEO Phong Le have called the proposed criteria “discriminatory” and “arbitrary.” Despite this pushback, market anxiety is palpable.

Share Dilution Emerges as a Core Concern

While the Nasdaq 100 provided a reprieve by retaining Strategy in its annual rebalancing on December 22, fundamental issues persist. Saylor responded defiantly on social media platform X, stating, “The Bitcoin hoarding will continue until the crying stops.” However, this aggressive accumulation strategy is funded primarily through substantial sales of new shares, leading to systematic dilution for existing stockholders.

A transaction on December 15 highlighted this mechanism: Strategy purchased 10,645 Bitcoin for $980 million, at an average price of $92,098 per coin. The purchase was financed by issuing 4.79 million new shares, which raised $888 million.

Should investors sell immediately? Or is it worth buying Strategy?

The company’s Bitcoin holdings are substantial:
* Total Treasury: 671,268 BTC (valued at approximately $60 billion)
* Average Purchase Price: $74,972 per Bitcoin
* Total Investment: $50.33 billion

A critical metric has now turned negative: the amount of Bitcoin per share has declined for the first time in years. Continuous dilution is eroding shareholder value. The market capitalization now trades at nearly a 1:1 ratio to the value of its Bitcoin holdings, meaning the equity receives little premium above the value of its core digital asset treasury.

Financial Reserves and Analyst Sentiment

To cover dividend payments and interest obligations, Strategy has built a dollar reserve of $1.44 billion, which management states is sufficient for 21 months. CEO Phong Le emphasizes that Strategy is an operating business, not a passive fund, and its valuation should reflect its ability to “grow the underlying assets, increase earnings, and expand the business.”

The market, however, remains unconvinced. Of 100 listed Bitcoin treasury firms with a traceable cost basis, 65 are sitting on unrealized losses, having purchased at prices above current market levels.

Despite the severe share price pressure, many research analysts maintain optimistic ratings. The consensus recommendation stands at “Moderate Buy,” with an average price target of $475.80—more than triple the current trading level. Bernstein has assigned an “Outperform” rating with a $450 target, while BTIG Research, despite lowering its target from $700 to $630, continues to recommend a “Buy.”

All eyes are now on the January 15 decision from MSCI. Until then, Strategy is expected to remain under significant pressure.