MSCI's Index Proposal Sparks Concerns Over 'Non-Operating Businesses'

A Bitcoin think tank has raised concerns about MSCI's latest proposal to tighten the rules governing its market indexes. The proposal, which was published on August 3, would exclude companies like Strategy and Metaplanet from its global indexes due to their classification as 'non-operating businesses'. This move could lead to significant outflows for these companies, with JPMorgan analysts estimating that Strategy could face around $2.8 billion in outflows if it were excluded.

According to the research paper 'Wall Street's Invisible Committee' by BPI, metadata shows that MSCI stored its source presentation behind the proposal in an internal folder specifically for digital asset treasury companies. This has led BPI to question whether MSCI's broader language carried forward its earlier effort to exclude these types of companies.

The new proposal would assess a company's substantial operating assets before applying five additional financial tests. However, BPI notes that the term 'operating assets' is not a standardized balance-sheet category under US Generally Accepted Accounting Principles or International Financial Reporting Standards. This could give MSCI significant discretion in how it classifies assets such as cash, investments, and strategic holdings.

BPI argues that this issue extends beyond crypto, with capital-intensive businesses like mines or satellite networks holding large amounts of assets before generating revenue. The think tank is calling on MSCI to publish clearer and reproducible criteria for determining which companies qualify for its broad-market indexes.