**TD Cowen Warns of Pressure on Strategy Amid MSCI Index Review**
**Meta Description:** TD Cowen analysts predict continued pressure on Strategy’s stock due to an upcoming MSCI index review, potentially leading to significant passive outflows.
**URL Slug:** td-cowen-strategy-msci-review
**TD Cowen Warns of Pressure on Strategy Amid MSCI Index Review**
Analysts at TD Cowen have raised concerns that Strategy’s stock may experience ongoing pressure as the MSCI index review approaches. The firm anticipates that public Bitcoin companies (PBTCs) like Strategy could be removed from all MSCI indexes in February, with a formal decision expected around mid-January. Cowen described the potential removal as “capricious,” urging investors to brace for sustained selling pressure.
It’s important to note that Strategy is not a fund, trust, or holding company; rather, it operates as a public company with a $500 million software business that generates all its revenue. The company’s Bitcoin treasury operations are innovative, providing unique Bitcoin-backed securities. Cowen’s analysts expressed that removing Strategy from broad indexes solely due to its Bitcoin focus seems arbitrary. They questioned whether MSCI’s reasoning reflects a bias against cryptocurrency rather than adhering to strict classification criteria. MSCI has raised concerns that PBTCs may resemble investment funds, which are ineligible for index inclusion. However, Cowen argues that Strategy’s structure is distinctly different.
The implications of MSCI’s potential exclusion are significant. JPMorgan recently warned that removing Strategy from the MSCI could lead to $2.8 billion in passive outflows. If other indexes follow suit, the total outflows could reach as high as $8.8 billion. Currently, Strategy’s market capitalization is approximately $59 billion, with around $9 billion invested in passive index-tracking vehicles. Any forced selling could further depress an already struggling share price, as JPMorgan noted. In recent months, Strategy’s shares have declined more than Bitcoin itself, with the company’s market value to Bitcoin holdings ratio (mNAV) dropping to just above 1.1, the lowest level since the pandemic began. Investors have witnessed a decline of over 60% in the stock since last November, with preferred shares and bond issuances also experiencing sharp sell-offs.
Despite this volatility, Cowen maintains a bullish long-term outlook for Strategy, estimating that the company could hold 815,000 BTC by 2027. At that level, the intrinsic Bitcoin value per share could support a price target of $585, suggesting a potential upside of approximately 170% from current levels. Cowen attributes the recent stock weakness to market volatility and index-related fears rather than any shortcomings in Strategy’s core accumulation model.
Michael Saylor, Strategy’s chairman, has downplayed concerns regarding index inclusion. In a recent statement, he emphasized that the company operates as a fully functioning business with active software and Bitcoin-backed credit programs. Saylor has consistently highlighted the company’s innovative financial products, including structured Bitcoin credit instruments that offer yields surpassing traditional credit markets. He envisions accumulating $1 trillion in Bitcoin and aims for annual growth of 20-30%, leveraging long-term appreciation to establish a substantial store of digital collateral.
**FAQ**
**What impact could the MSCI index review have on Strategy’s stock?**
The MSCI index review could lead to significant passive outflows from Strategy, potentially resulting in a decline in its stock price if the company is removed from the index.
