MicroStrategy May Qualify S&P 500 Inclusion with New Accounting Standards

• Benchmark reports that MicroStrategy could qualify for S&P 500 inclusion if the firm adopts new accounting standards.
• The report also forecasts a gain of $300 per share in the first quarter of the year if new standards are adopted.
• The company’s earnings are adversely affected by the current FASB rule ASC 350.

In a recent report, broker Benchmark asserted that MicroStrategy (MSTR) could be qualified for inclusion in America’s most important stock index, the S&P 500, if it adopts new accounting standards. In addition, the report stated that the amendment would significantly impact the company’s earnings per share.

Notably, Benchmark’s report estimated a gain of above $300 per share in the quarter if MicroStrategy decides to adopt the Financial Accounting Standards Board’s (FASB) new ASU 2023-08 standard. The report read,

The company in its 2023 10-K report estimated that early adoption of the new accounting rules would increase its 2024 beginning retained earnings balance by around $3.1 billion.

According to the report, MicroStrategy currently employs the existing FASB rule ASC 350. Thus, with the decreasing Bitcoin price, the company’s earnings are adversely affected.

Only with positive earnings in the most recent quarter could a company think of S&P 500 inclusion. As MicroStrategy has reported losses in 10 of the previous 14 quarters, the adoption of new accounting standards is expected to bring positive earnings. It is noted that MicroStrategy has recorded over $2.26 billion in cumulative impairment losses due to the current standards. Mark Palmer, a Benchmark analyst, stated,

Inclusion in the S&P 500 would position MSTR’s stock valuation to receive an ongoing boost from the price-agnostic purchases of its shares resulting from enormous passive inflows.

Meanwhile, MicroStartegy’s first quarter 2024 financial results are expected to be released on April 29, 2024 (Monday). As per Google estimates , there are speculations that the company would swing to losses.