Strategy Reports $11 Billion Net Income, Aims for S&P 500 Inclusion

Strategy, the largest public holder of Bitcoin, is on the verge of qualifying for inclusion in the prestigious S&P 500 index. This potential milestone comes as the company is expected to report a significant net income for the second quarter of the year. Jeff Walton, founder of MSTR True North, revealed that the company will likely report an $11 billion net income for the just-concluded second quarter. This figure is based on fair-value accounting standards applied to its Bitcoin holdings, which places the company in the same earnings bracket as tech giants like Apple and Microsoft.

Walton emphasized that this milestone clears the final hurdle for inclusion in the S&P 500, as it fulfills the profitability criterion based on a four-quarter cumulative positive income. However, the final decision rests with the S&P Index Committee, where debate is expected. The S&P 500 comprises 500 top-performing US public companies by market capitalization, collectively representing around 80% of the total market cap of US equities. Entry into this index requires meeting several standards, including US domicile, sufficient liquidity, and positive earnings over the last four quarters.

Last year, Strategy was added to several top stock indexes like the Nasdaq 100 and MSCI World Index. However, analysts have long viewed an S&P 500 inclusion as the firm’s “holy grail.” Such a move would significantly validate the firm’s unconventional Bitcoin-centric approach and raise its stature in mainstream finance. The company’s stock trades well above the net asset value of its Bitcoin holdings, mainly due to investor demand for indirect crypto exposure. This premium allows the firm to issue shares, raise capital, and acquire more Bitcoin. Though this dilutes existing shareholders’ equity, it increases the Bitcoin-per-share ratio, which helps boost the intrinsic value of each investor’s stake.

The strategy has also contributed to elevated share prices that have outperformed all those in the S&P 500 index since the firm adopted the Bitcoin standard in 2020. So far, Strategy has acquired 597,325 BTC, valued at over $63.9 billion, with an unrealized gain exceeding $21 billion. Interestingly, news of a potential inclusion in the S&P Index did not help boost market sentiment, with Strategy shares down 6% in early trading on July 1 to $379.20 as of press time.