Strategy Enters Negotiations as MSCI Index Exclusion Threat Grows

Highlights:

• MSCI Index exclusion may create billions in forced selling pressure.
• Strategy’s stock dropped over 37% as Bitcoin plunged from record highs.
• The company’s market cap has fallen below its Bitcoin reserve value.

Strategy (formerly Microstrategy) has initiated official negotiations with global index provider MSCI. The move follows the mounting pressure due to the recent MSCI and Nasdaq reviews. The two groups are also deciding on whether companies that rely more on digital assets can still attain key equity benchmarks, Reuters reported.

Strategy executive chairman Michael Saylor confirmed the company is actively working with MSCI before its January 15 announcement. JPMorgan analysts caution that removing Strategy from indexes would compel passive funds to sell up to $8.8 billion worth of shares. Despite this caution, Saylor indicated that he is not fully convinced that the projected outflows reflect the prevailing market forces.

According to Reuters, Strategy (MSTR) Chairman Michael Saylor said the company is engaging with index provider MSCI regarding a potential exclusion from its indices. MSCI is expected to make a decision on January 15. JPMorgan previously noted that if the exclusion takes effect…

— Wu Blockchain (@WuBlockchain) December 3, 2025

Crypto Volatility Fuels Stock Decline

Bitcoin fell to a low of $82,000, and Strategy stock fell over 37% year-to-date after reaching its highest point in October at over $120,000. Despite the recent recovery of BTC to $93,000, MSTR shares are still down more than 30% in the month.

Strategy holds 650,000 BTC, worth more than $60 billion, but its market capitalization has dropped below that. Such a valuation gap is a question mark for the risk profile and sustainability of the company. CEO Phong Le recently admitted that the company may sell Bitcoin in case its adjusted asset value declines too significantly. Moreover, Strategy established a cash reserve of $1.44 billion to manage debt interest and dividend payments to address market fears.

$MSTR announces the formation of a $1.44 billion USD Reserve and an increase in its BTC Reserve to 650,000 $BTC. pic.twitter.com/e1tAhDUo9G

— Michael Saylor (@saylor) December 1, 2025

Amidst this MSCI Index exclusion, the firm’s strategically invested leveraged ETFs have also been impacted by the recent volatility. Two 2x long funds have plummeted by almost 85% this year, and inverse funds also dropped as BTC dropped below $90,000.

MSCI’s Review Sparks Broader Debate

The focus of the review by MSCI is whether companies that own more than half of their assets in crypto should be classified as holding vehicles. Companies such as Strategy face MSCI Index exclusion as early as February 2026 under new proposals.

Losing benchmark status would undermine the capacity of Strategy to raise capital, analysts warned. It would also reduce access to passive investors who rely on index tracking due to the steady inflows. Saylor responded that the Strategy’s stock is specifically set to perform more aggressively than Bitcoin. “Should it plunge by 30% or 40%, then the stock would decline even further,” he said.

Still, concerns linger. According to some experts, Strategy is exposed in market declines due to its leverage structure as a Bitcoin proxy. The change in policy by MSCI has the potential to have an effect on funds with similar firms.

Investor Sentiment and Market Impact

The recent Strategy’s stock rebound, which has risen 6% following a Bitcoin recovery, brought some short-term relief. However, shares are yet to recover following the potential MSCI Index exclusion. Critics claim that the company’s model of capital raising, which includes issuing shares and debt to purchase BTC, may no longer be sustainable. Peter Schiff, a financial strategist, noted that the recent sale of shares by the company revealed more serious problems.

Today is the beginning of the end of $MSTR. Saylor was forced to sell stock not to buy Bitcoin, but to buy U.S. dollars merely to fund MSTR's interest and dividend obligations. The stock is broken. The business model is a fraud, and @Saylor is the biggest con man on Wall Street.

— Peter Schiff (@PeterSchiff) December 1, 2025

Saylor, however, stood his ground despite the criticism. According to him, the basics of the firm are more than index-based. However, index membership offers essential visibility, liquidity, and access to institutional capital.