Benchmark allows the possibility of MicroStrategy to be included in the S&P 500 if new accounting standards are adopted

What’s new? Analytics software company MicroStrategy (MSTR) will be able to qualify for inclusion in the S&P 500 stock index if it adopts new accounting standards, according to analysts at brokerage Benchmark. The move to the new standards will allow the company to report earnings of more than $300 per share for the first quarter, thus meeting the last requirement for inclusion in the index.

Material by CoinDesk

What else is known? MicroStrategy’s corporate strategy is based in part on buying and holding bitcoin for an extended time. As of March 19, the company owned 214 246 BTC worth $13,9 billion at current prices. The value of their purchases totaled $7,53 billion.

According to Benchmark, since MicroStrategy began holding bitcoin on its balance sheet, it has recorded cumulative impairment losses of $2,27 billion due to the Financial Accounting Standards Board’s (FASB) ASC 350 rule.

That said, the FASB issued new guidance last year that allows companies with digital assets on their balance sheet to measure them at fair value and recognize those changes in net income each reporting period. The new rules are effective January 1, 2025, but early implementation is also allowed.

Moreover, at the time, MicroStrategy founder and board head Michael Saylor praised the new guidance, saying it would remove a major obstacle to corporate adoption of the first cryptocurrency.

Benchmark estimates that early adoption will allow the company to report a profit instead of the projected quarterly loss of $0,55 per share.

MicroStrategy currently meets nearly all of the criteria for inclusion in the S&P 500, according to the report. The company is based in the United States, its stock is highly liquid, 50% of its outstanding shares are available for trading, and its market capitalization exceeds $18 billion. In order for the committee to consider including MSTR in the S&P 500, it must also report positive earnings for the most recent quarter.

Benchmark notes that MicroStrategy has reported losses in 10 of the last 14 quarters. The early adoption of the new standards means the company could meet this latter criterion.

However, analysts have conceded that the company will not adopt the new standards in the near term due to uncertain tax implications.

At the time of writing, MSTR is trading at $1241,87, having lost 1,88% overnight. At the same time, the stock has gained 83,07% since the beginning of the year.