Is Saylor’s Bitcoin Play Hitting A Wall? JPMorgan Warns Of Over $8B Stock Selloff Risk As MSTR Bleeds For 7 Straight Weeks

• JPMorgan analysts flagged on Wednesday that the stock faces risk if MSCI decides to exclude digital asset treasury companies from its various indexes.
• The brokerage estimated that the Strategy could see about $2.8 billion in sales if it's removed from MSCI indexes like the MSCI USA and MSCI World, and $8.8 billion if others follow suit.
• “Had Saylor bought just about any other asset, MSTR would have been better off.” — Peter Schiff.

Strategy stock fell over 5% on Thursday amid weakness in the broader markets, keeping it on track for its seventh successive weekly decline.

The Bitcoin treasury firm’s shares have fallen more than 11% this week, after a more than 17% slump in the previous 5-day trading period. The stock has logged a decline in eight of the last 10 sessions.

Mixed Jobs Data Lowers Rate Cut Hopes

Most risk-on assets, including equities and cryptocurrencies, declined on Thursday following mixed September jobs data that further lowered rate cut expectations. The U.S. economy added 119,000 jobs just before the government shutdown, well above expectations of 50,000. However, the unemployment rate also rose to 4.4%, the highest since 2021.

According to CME Group’s FedWatch tool, only 36% traders expect a rate cut after the next Federal Open Market Committee meeting in December, compared with over 98% a month earlier. The tech-heavy Nasdaq composite fell by more than 2%, the S&P 500 fell 1.6%, and Bitcoin dipped to its lowest since April 21.

MSCI Index Exclusion Could Add To Worries

According to a report by Barron’s, JPMorgan analysts flagged on Wednesday that the stock faces risk if MSCI decides to exclude digital asset treasury companies from its various indexes.

"If MicroStrategy is excluded from these indices, it could face considerable pressure to its valuation given that passive index-tracking funds represent a substantial share of its ownership," the JPMorgan analysts reportedly noted.

JPMorgan estimates Strategy's shares could face roughly $2.8 billion in forced selling if it's dropped from MSCI indexes such as MSCI USA and MSCI World — and as much as $8.8 billion if other index providers like Russell follow suit.

What Are Stocktwits Users Thinking?

Retail sentiment on Stocktwits about Strategy, co-founded by Michael Saylor, was in the ‘bullish’ territory at the time of writing, compared with ‘extremely bullish’ a week ago.

“Can kiss goodbye any chance for SPY inclusion now,” one investor wrote. The company has often expressed its hopes of the firm’s inclusion in the coveted S&P 500 index in the past.

Saylor Stays Upbeat - As Always

Strategy said on Monday that it had acquired 8,178 Bitcoin for $835.6 million, bringing its total Bitcoin holdings to 649,870. The purchase was made at an average price of $102,171 per Bitcoin. Strategy, the largest holder of Bitcoin in the world, issues preferred shares to accumulate more Bitcoin by offering investors exposure to Bitcoin without actually owning it.

The company’s mNAV, its multiple on net asset value, or the premium in the stock price over the firm’s underlying Bitcoin holdings, stands at 1.2 after dipping below one a few weeks earlier. Investors consider an mNAV of 2 or higher to be a healthy level.

Economist Peter Schiff, known for his hawkish stance on cryptocurrencies, said on Thursday that after spending over $48 billion to buy Bitcoin, the firm’s total paper profits stand at less than 17%. “Had Saylor bought just about any other asset, MSTR would have been better off. Plus, if Saylor ever tries to realize this gain, it will vanish,” he said.

However, Saylor has remained confident about the firm despite the volatility. He said earlier this week that Strategy is “engineered” to survive an 80-90% drawdown and continue operating. He noted that the company’s leverage remains “extremely robust,” currently at 10 to 15% and trending “toward zero.”

“So, I think we’re pretty indestructible,” he said. He also noted that until Bitcoin rises by as little as 1.25% annually, Strategy can maintain its dividend payments indefinitely. Strategy stock has fallen nearly 39% this year, while Bitcoin has fallen over 8%.

Also See: Robinhood Stock Heads Toward Worst Weekly Decline Since April: Cathie Wood's Ark Investment Loads Up Amid Dip

For updates and corrections, email newsroom[at]stocktwits[dot]com.

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