MicroStrategy’s addition to the Nasdaq-100 is an important step, but its potential entry into the S&P 500 index could represent an even greater opportunity, according to a recent report by Benchmark.
On Friday, the index provider announced that MicroStrategy would be included in the Nasdaq-100 starting December 23. While the company meets key requirements for S&P 500 inclusion, such as market capitalization and trading volume, there are two remaining hurdles to overcome. The company must report positive earnings for the most recent quarter and show positive earnings over the previous four quarters.
However, MicroStrategy is preparing to implement the Financial Accounting Standards Board’s (FASB) new guidance on the accounting treatment of bitcoin on its balance sheet in the first quarter of 2025. This move could allow the company to begin reporting positive earnings, bringing it closer to qualifying for the S&P 500.
Once included in the Nasdaq-100, MicroStrategy will become the 40th largest company in the index, representing 0.47% of the overall weight, as reported by Bernstein. This move is significant, as it means MicroStrategy will be added to one of the largest ETFs, the Invesco QQQ Trust Series, which tracks the Nasdaq-100.
The potential for an S&P 500 inclusion could have an even bigger impact. Historical trends show that companies often experience substantial stock price increases upon joining the S&P 500. Tesla’s stock, for instance, surged after it was added to the index in December 2020, jumping from around $200 to $400 within a year. The bulk of Tesla’s price increase occurred before its inclusion, suggesting MicroStrategy could see a similar surge in value leading up to its potential inclusion.
