(Bloomberg) — MicroStrategy Inc., the dot-com-era software developer whose transformation into a bet on Bitcoin has transformed Wall Street, will join the Nasdaq 100 Index, the benchmark regulator said Friday. Software company Palantir Technologies Inc. and Axon Enterprise Inc., makers of Tasers and police body cameras, will be added.
Information Read from Bloomberg
Illumina Inc., Super Micro Computer Inc. and Moderna Inc. will be removed from the Nasdaq 100. These changes will be effective before the market opens on Monday, Dec. 23.
The decision to add MicroStrategy, announced at the end of Friday by Nasdaq Global Indexes, represents a major stamp of approval from the controversial founder, Michael Saylor, whose anti-Wall Street rally has helped fuel a 500% rally in its shares this year. made him a hero to the Bitcoin bull. The company started developing business analysis software more than thirty years ago but it has become popular and important since it started collecting Bitcoin coins in 2020.
A gain of more than 40% in the past three months has made the company’s market capitalization nearly $100 billion, more than half of the members of the Nasdaq 100, satisfying the most important requirement for membership. With the appreciation has come high volatility – shares have changed about five times as much as the Nasdaq index over the period – a trend that could cause chaos in the benchmark itself due to its weight.
“Adding MicroStrategy provides more stability. It’s not too difficult for newcomers – Palantir is not inferior, by the way – but it’s actually a Bitcoin game,” said Steve Sosnick, chief analyst of Interactive Brokers. “So consider that Bitcoin is closely related to NDX except for volatility.”
Shares of the Tysons Corner, Virginia-based company have been a major investment story this year and surged more than 500% as it developed an unofficial plan to raise funds to buy and hold cryptocurrency. It has announced multi-billion dollar purchases every Monday for the past five weeks, rising along with the value of the brand – and raising questions in some circles about the sustainability of the process.
MicroStrategy’s inclusion in the index could have an impact on Bitcoin itself, which jumped more than 1% after the news was announced. In addition to selling convertible bonds, Saylor has raised billions of dollars to support his crypto purchases by issuing new stocks on the market. The products may be easier if the target index becomes a source of demand.
MicroStrategy posted its third consecutive quarterly loss after charging a fee for its roughly $18 billion worth of cryptocurrency reserves. Third-quarter revenue from its software business fell 10% below forecasts.
Palantir’s merger reflects an improvement in manufacturing intelligence, which has led to the stock’s 343% loss this year. It’s another milestone for the company that makes tools to monitor companies and governments after it was added to the S&P 500 in September.
Founded by billionaire Peter Thiel, the company reported better-than-expected third-quarter earnings and raised its operating income guidance for the current period, citing strong demand in the US for its smart software.
Palantir built its reputation working with the US intelligence community, and is now used by all branches of the US military as well as allied organizations in Ukraine and Israel.
Meanwhile, Axon is having another good year, with its stock up 150% year to date. The Scottsdale, Arizona-based company reported better-than-expected third-quarter profit and raised its full-year guidance. Investors and analysts have been interested in its new AI-powered software, including Draft One, which can generate written reports from audio recorded from police cameras.
The Nasdaq 100 consists of the largest non-financial companies listed on the Nasdaq stock exchange. There is no minimum requirement to be included, but the stock must have a daily trading volume of at least 200,000 shares, among other criteria.
Getting listed can benefit a company by providing increased trading capital, lower cost of capital and greater visibility from investors. In addition, an abandoned Nasdaq 100 index expands a company’s portfolio and increases liquidity – factors that can increase a company’s value.
Many large-cap funds, such as the $320 billion Invesco QQQ Trust Series 1 exchange-traded fund, track the Nasdaq 100 and must hold all of its members’ shares. And the actively managed funds represented by them should also buy stocks.
About $451 billion in ETFs worldwide track the Nasdaq 100 directly, Bloomberg Intelligence’s James Seyffart wrote in a recent note, and at least $22 billion worth of purchases in 19 different stocks and ETFs around the world will take place when the index resumes. The addition of Palantir, MicroStrategy and Axon would generate at least $3.8 billion, $2.1 billion, and $1.3 billion in acquisitions, respectively, the calculations show.
The Nasdaq 100 is up 30% this year as mega-cap technology helps lift the index. By comparison, the S&P 500 has gained 27%, while the Dow Jones Industrial Average is up 17%.
–With help from Emily Graffeo, Monique Mulima and Carmen Reinicke.
(Change the strategist’s comment in the fifth paragraph)
