Benchmark Suggests MicroStrategy’s Nasdaq-100 Spot May Lead to S&P 500 Inclusion

MicroStrategy’s recent addition to the Nasdaq-100 index marks a notable achievement, but the company’s potential inclusion in the S&P 500 could offer an even more significant opportunity in the medium term, according to a report from broker Benchmark on Monday.

The index provider announced on Friday that MicroStrategy would be included in the Nasdaq-100, with the addition set to take effect on December 23. Although the company satisfies the market cap and trading volume criteria necessary for inclusion in the S&P 500, it still needs to meet two other key requirements.

As highlighted by analyst Mark Palmer, MicroStrategy must report positive earnings for the latest quarter and demonstrate positive earnings over the previous four consecutive quarters. However, the company has plans to adopt new Financial Accounting Standards Board (FASB) guidelines for bitcoin held on its balance sheet by the first quarter of 2025. This shift could enable MicroStrategy to start reporting positive earnings, positioning it for potential inclusion in the S&P 500.

MicroStrategy’s entrance into the Nasdaq-100 will make it the 40th largest company in the index, accounting for a 0.47% weighting, according to Bernstein. This inclusion is particularly noteworthy as it means that the company will be added to the Invesco QQQ Trust Series ETF, the fifth-largest ETF by assets under management (AUM), which tracks the Nasdaq-100.

Invesco QQQ, along with two other large ETFs—the SPDR S&P 500 (SPY) and the Vanguard S&P 500 (VOO)—are composed of companies from the S&P 500 and collectively manage over $1.8 trillion in AUM.

The impact of MicroStrategy’s potential S&P 500 inclusion could be substantial. A similar scenario occurred with Tesla (TSLA), which saw its stock price soar following its addition to the S&P 500 on December 21, 2020. Tesla’s shares doubled from $200 to $400 within a year, with most of the gains taking place before its S&P 500 inclusion. This suggests that MicroStrategy may see significant gains even before it officially joins the index.