Crypto Enterprise Influence Expansion Triad: IPO, Nasdaq 100, and S&P 500

Original Author: "The Three Strategies for Expanding Crypto Enterprise Influence: IPO, Nasdaq 100, and S&P 500?"

Original Author: 1912212.eth, Foresight News

MicroStrategy has been formally included in the Nasdaq 100 Index and will take effect before market open on Monday, December 23. This also makes MicroStrategy the first cryptocurrency company to be included in the Nasdaq 100 Index.

Subsequently, MicroStrategy's Chairman, Michael Saylor, anticipates that the Bitcoin mining company MARA will be the next crypto company to be included in the Nasdaq 100 Index.

The inclusion of crypto enterprises in stringent benchmarks is driven by the increasing acceptance by the traditional fintech industry. From going public to being included in the top 100 index, crypto enterprises are triggering a trend of imitation.

The Wave of Crypto Enterprise U.S. Listings

The United States remains the world's leader in technology, with its stock market playing a vital role globally. The ripple effect of the crypto industry's expansion often involves going public in the U.S., leading to widespread visibility. Listing on Nasdaq provides crypto enterprises with positive impacts on legitimacy, funding, liquidity, and more.

The U.S. listing process and requirements generally adhere to high standards. Companies applying for listing are subject to specific requirements and regulations regarding recent company revenue, market value, market makers, corporate governance, financial reporting, and compliance reviews.

Since 2020, various players in the crypto market, including mining companies, exchanges, and crypto wallets, have gone public. In the exchange arena, Coinbase made its debut on Nasdaq in April 2021. Japanese securities firm and crypto exchange operator Monex Group merged its subsidiary Coincheck Group N.V., which subsequently went public on December 11.

In the mining sector, companies such as CleanSpark, Mara Digital Holdings, and Riot Platforms have listed. In the crypto wallet domain, Exodus Movement went public on the NYSE on December 18.

It is worth noting that some companies initially went public with businesses not related to the crypto industry but later transitioned into the crypto sector, as seen with companies like Riot Blockchain and MicroStrategy.

In addition to the above-mentioned encrypted companies that have gone public, companies currently preparing to go public include Bitcoin financial services company Fold, DeFi Technologies, and online brokerage firm eToro.

The US exchange Kraken appointed a new Chief Financial Officer, Stephanie, in November this year, with its CEO stating that it is preparing for the listing. The CEO of Circle also expressed in an interview in October this year that he has been eager to go public for many years and has not changed this vision.

In each cycle, many encrypted companies officially go public. In 2025, with the continuous advancement of compliance and influence, more encrypted companies may go public in the US.

Nasdaq 100 Index

After encrypted companies go public, the Nasdaq 100 Index has become a ladder to further gain influence and visibility.

The Nasdaq-100 Index is an index launched by the Nasdaq Stock Market, consisting of the 100 largest non-financial companies listed on the Nasdaq Stock Market. This index reflects the overall market performance of these companies and is one of the key indices that global investors pay attention to.

Being included in the Nasdaq 100 Index means that the market value, stock liquidity, financial profitability, compliance, and other factors of a company meet its stringent criteria.

Over the past few years, MicroStrategy, with its Bitcoin accumulation strategy and remarkable profit levels, has ultimately won its ticket to be included in the index.

Since 2020, MicroStrategy has been using BTC as its primary reserve asset. With MicroStrategy's aggressive buying and the strong rise of Bitcoin in the new cycle, its stock price has also been rising. In January 2023, MSTR's stock price was only $150, but in March 2024, it surged to a record high of $1999.99, with a market value of trillions of dollars. In just over a year, its stock price has soared by over 1000%. On December 18, Michael Saylor announced that MicroStrategy's financial operations in the quarter brought shareholders a net income of 116,940 BTC, with a yield of 46.4%. Calculated at $10,000 per Bitcoin, the net income for the quarter is approximately $12.28 billion.

Not only has its stock price and profit levels performed well, but its market value has also fluctuated around the trillion-dollar mark, making it one of the few encrypted public companies with a market value surpassing a trillion dollars.

In addition, after being formally included in the Nasdaq 100 Index, it was also officially categorized not as a financial stock, but rather, based on its main business of "software as a service," classified as a technology stock.

MicroStrategy originally focused on providing business intelligence (BI), mobile software, and cloud-based services as its main business. Its main competitors include SAP AG's Business Objects, IBM Cognos, and Oracle Corporation's BI platforms. According to its 2020 financial report, MicroStrategy's annual revenue was $480 million. Since starting to invest heavily in Bitcoin in 2020, MicroStrategy has gradually been seen as a Bitcoin-related stock, and its main revenue business has also been influenced by Bitcoin investments, although its core business remains software and services.

For the crypto industry, the influence of the Nasdaq 100 may also inspire more companies to emulate MicroStrategy and join the ranks of Bitcoin investors.

Is MARA the Next Cryptocurrency Company to Join the Nasdaq 100?

Bitcoin mining company MARA has become the next company of interest that may join the Nasdaq 100.

Similar to MicroStrategy's style, over the past few months, MARA has raised hundreds of millions of dollars through convertible senior notes offerings to continuously accumulate Bitcoin. However, gaining entry into the Nasdaq 100 Index poses some challenges.

Although MARA is a non-financial company and its profit levels and company liquidity meet certain requirements, it still lags far behind MicroStrategy in terms of company valuation. Typically, companies selected for the Nasdaq 100 have relatively high market capitalizations, as companies must reach a certain scale to be included in the top 100.

As of now, MicroStrategy has a market cap of over $90 billion, while MARA's market cap fluctuates around $8 billion, making the two differ by more than 10 times.

In order for a new company to join the Nasdaq 100 Index, other companies must be removed. Although MicroStrategy is one of the three new additions, Illumina ($22.7 billion), Super Micro Computer ($19.8 billion), and Moderna ($15.7 billion) will be removed.

Currently, the imminent deletion of these three companies has a market value exceeding 15 billion USD, still more than double MARA's market value, casting a shadow over its inclusion.

MARA still has a considerable distance to cover to join the Nasdaq 100 Index; perhaps in the near future, MARA will be selected based on its performance data.

How Far Away is the S&P 500 Index

The S&P 500 comprises the 500 largest companies in the U.S., covering about 80% of the total U.S. stock market capitalization. The selection of component stocks is based on market capitalization, liquidity, profitability, and industry representation. The S&P 500 is considered a benchmark for the health of the U.S. economy and the performance of large-cap stocks.

In comparison, the Nasdaq 100 and the S&P 500 have similar selection criteria, with high requirements for market capitalization and stock liquidity. However, the Nasdaq 100 places more emphasis on the technology and innovation sectors, serving as a key indicator for growth-oriented investments.

The S&P 500, on the other hand, emphasizes financial stability and profitability, which pose relatively high standards for mining companies and crypto firms with a hodling strategy.

It is well known that the crypto industry's four-year cycle is still evident, with market cycles often leading to significant company profits during bull markets. However, once the cycle shifts to a bear market and coin prices decline, it can have a significant negative impact on mining and Bitcoin asset-holding companies. In some cases, companies may suffer severe setbacks due to factors like cash flow.

In summary, the S&P 500's selection criteria may be generally higher as it considers not only market performance but also strict requirements for financial health and industry diversity. The Nasdaq 100 is more focused on market performance and innovation, with a relatively more automated selection process. However, for companies in specific industries, inclusion may signify higher market recognition.

The company meets the minimum market value and trading volume standards of the S&P 500 Index but currently does not meet other requirements: positive total earnings for four consecutive quarters.

Benchmark stock analyst Mark Palmer analyzed, "MicroStrategy has planned to adopt new Financial Accounting Standards Board (FASB) guidelines for the accounting treatment of Bitcoin held on the company's balance sheet starting in the first quarter of 2025, which will enable it to immediately report positive earnings."

Since launching its Bitcoin acquisition strategy in August 2020, MicroStrategy has incurred a cumulative impairment loss of 3.1 billion USD. In December last year, the FASB issued new guidelines allowing companies holding digital assets on their balance sheets to measure these assets at fair value and record changes in fair value net income within each reporting period. The new rules will be effective from January 1, 2025.

Palmer continued his analysis, stating, "MSTR is expected to achieve a one-time billion-dollar quarterly net income in the first quarter of 2025, which will equal the difference between its book value of Bitcoin and its market value. If proven, the net income growth, sufficient to generate positive figures for the past 12 months, along with MSTR's losses in the first three quarters, would bring the company to the inclusion threshold for the S&P 500 by the second rebalancing of the index in 2025, scheduled for the third Friday in June."

If the market conditions remain favorable, MicroStrategy will have the opportunity to be reselected for the S&P 500 index in June next year, achieving success in both the Nasdaq 100 and the S&P 500.

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