(Bloomberg) — MicroStrategy Inc., the dot-com-era software maker whose pivot to a backed bet on bitcoin sent Wall Street into a tizzy, is joining the Nasdaq 100, the index’s supervisor said Friday. Software company Palantir Technologies Inc. will also be added. and Axon Enterprise Inc., a manufacturer of Tasers and police cameras.
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Illumina Inc. companies will be removed. and Super Micro Computer Inc. and Moderna Inc. of the Nasdaq 100. The changes will be effective before the market opens on Monday, December 23.
The decision to add MicroStrategy, announced by the Nasdaq Global Indexes late Friday, represents a major seal of institutional approval for its founder Michael Saylor, whose disdain for Wall Street convention helped spur a 500% rally in his shares this year and made him a hero to Bitcoin bulls. The company started out as a maker of enterprise analytics software more than three decades ago but has gained popularity and become exponentially more valuable since it began collecting bitcoin deliveries in 2020.
Gains averaging more than 40% over the past three months have pushed the company’s market capitalization to nearly $100 billion, more than half that of the Nasdaq 100 members, which meets a key prerequisite for membership. With the rise in value also came extreme volatility — stocks swung about five times as much as the Nasdaq over the period — a trait that could add turmoil to the benchmark index itself given its potential weight.
“Adding MicroStrategy offers the potential to really increase volatility. It’s not only the most volatile of the new entrants — and Palantir is no slouch, by the way — but it’s essentially a leveraged play on Bitcoin,” said Steve Sosnick, chief strategist at Interactive Brokers. “Then keep in mind that Bitcoin is closely related to the NDX except with more volatility.”
Shares of the Tysons Corner, Virginia-based company have become a major investment story this year by surging more than 500% as it accelerated an unconventional plan to raise capital solely to buy and hold the cryptocurrency. It has announced multibillion-dollar acquisitions every Monday for the past five weeks, and they have risen along with the price of the token — raising questions in some circles about the sustainability of the strategy.
MicroStrategy’s inclusion in the index could have bullish implications for Bitcoin itself, which quickly jumped more than 1% after the news was announced. Besides selling convertible bonds, Saylor raised billions of dollars to finance the purchase of cryptocurrencies by issuing new shares on the market. These sales could become easier if investors tracking indices become a source of near-term demand.
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