U.Today – Eric Balchunas, Bloomberg’s senior ETF analyst, has opined that it could take a while for business intelligence firm MicroStrategy to become part of the S&P 500 stock market index.

In order to become part of the index, companies are supposed to have cumulative positive profits over the past four quarters. MicroStrategy, however, was profitable for only one out of the last four quarters.

That said, a new accounting rule that would allow the company to log the changes in the fair value of its fortune as net income. This means that the company could potentially start reporting impressive earnings that would qualify it for being included on the S&P 500.

Its entry would have to be green-lit by the S&P 500 inclusion committee, meaning that a certain stock can still be ignored even if it ends up being eligible for inclusion.

For instance, Tesla (NASDAQ:) failed to be included in September 2020 despite recording four consecutive quarters of profits. Back then, analysts were widely expecting the stock to become part of the index, and the snub made the stock price crash. The stock eventually joined the index in September.

The committee, which wants the S&P 500 index to accurately represent the U.S. stock market, has relatively vague criteria for inclusion. This makes it a major hurdle for MicroStrategy. “They’ve been known to block qualifying stocks prior to inclusion,” Balchunas noted.

Earlier this week, MicroStrategy, which is known as the largest corporate holder of Bitcoin, was added to the tech-heavy Nasdaq-100 index.

In the meantime, Bitwise recently predicted that Coinbase (NASDAQ:) could be included in the S&P 500 as soon as next year.

This article was originally published on U.Today




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