Michael Saylor built Strategy around a simple thesis: accumulate Bitcoin, and the market will eventually reward you. The market has, in many ways. The S&P 500 index committee, however, remains unconvinced.
Strategy Inc., the company formerly known as MicroStrategy, is ineligible for Friday’s S&P 500 quarterly rebalance. The reason is the same one that has blocked it before: negative GAAP earnings, driven by unrealized losses on its Bitcoin holdings.
Why GAAP keeps Strategy on the outside
The S&P 500 has a profitability requirement that trips up Bitcoin-heavy balance sheets in a very specific way. To qualify, a company must post positive as-reported earnings, meaning GAAP net income, across both its most recent quarter and its trailing four quarters combined.
Strategy reported an unrealized loss of $17.44 billion on its Bitcoin holdings in a single recent quarter. That figure, which shows up as a loss under GAAP accounting rules, effectively disqualifies the company regardless of how well its underlying software business performs.
