MicroStrategy (MSTR) Could Merit S&P 500 Index Inclusion if It Adopts New Accounting Rules: Benchmark

MicroStrategy, a software company known for its bitcoin holdings, has the potential to surprise analysts with better-than-expected earnings if it embraces new accounting standards. This move could also pave the way for its inclusion in the prestigious S&P 500 index. The company’s early adoption of the updated accounting rules could result in a significant increase in reported earnings per share, positioning it favorably for index inclusion.

The new accounting standards, which allow for the fair valuation of digital assets on the balance sheet, could lead to a massive increase in MicroStrategy’s retained earnings balance. Analysts estimate that the company could report a gain of over $300 per share for the first quarter if it opts for early adoption.

MicroStrategy currently meets most of the criteria for S&P 500 inclusion, such as being based in the U.S., having highly liquid shares, and a market cap exceeding $18 billion. The final requirement for index inclusion is reporting positive earnings in the most recent quarter, a criterion that early adoption of new accounting standards could help the company meet.

If included in the S&P 500, MicroStrategy’s stock valuation could receive significant boosts from passive inflows, further enhancing its market position. However, potential uncertainties surrounding the tax implications of adopting the new guidance could influence the company’s decision to embrace the updated accounting standards.

By Will Canny