Matthew Sigel Forecasts Block’s Entry into S&P 500, Leaving Out MicroStrategy

• Block Inc. meets all six criteria for S&P 500 inclusion after its Q1 2024 earnings report but awaits Index Committee approval.
• Block holds $220M in Bitcoin, aligning with CEO Jack Dorsey’s crypto advocacy, potentially making it the first Bitcoin holder in the S&P 500.
• Coinbase and MicroStrategy, despite meeting criteria, face hurdles due to pure crypto exposure and Index Committee sector diversification goals.

Block Inc., formerly known as Square, may soon set a significant precedent in the financial sector. Matthew Sigel, head of digital assets research at VanEck, recently shared insights into Block’s potential inclusion in the S&P 500. The company meets critical criteria for eligibility and could become the first Bitcoin-holding company in the prestigious index.

Essentially, to qualify for the S&P 500, companies must meet six specific requirements. These include a market capitalization exceeding $18 billion and public investors holding over 10% of the company’s shares. 

Also, companies must have positive GAAP earnings for the most recent quarter and the last four combined. Additionally, high liquidity, a U.S. domicile, and more than 12 months of IPO seasoning are necessary.

According to Sigel, Block satisfied the earnings criteria following its first-quarter 2024 report. However, S&P 500 inclusion is not guaranteed. The Index Committee holds the final discretion, with decisions often influenced by sector diversification considerations. Historically, companies meeting all requirements gain inclusion within three to 21 months.

Additionally, Block’s strong association with Bitcoin sets it apart from other contenders. The company made its first Bitcoin investment in October 2020, purchasing $50 million. This was followed by another $170 million acquisition in February 2021. CEO Jack Dorsey has been a long-time advocate of Bitcoin, aligning Block with the digital asset.

However, despite its qualifications, the inclusion process may face delays. The S&P 500 Index Committee often considers sector balance to align the index with the broader economy. Sigel highlighted this as a potential factor that could influence the timeline for Block’s inclusion.

Similarly, other cryptocurrency-linked companies, such as Coinbase and MicroStrategy, are also in the spotlight. Coinbase reportedly meets the same six criteria, but Sigel described it as a “controversial pick” due to its pure crypto exposure.

Meanwhile, MicroStrategy recently joined the Nasdaq-100 but is unlikely to join the S&P 500 soon. This is despite its strong 2024 performance and significant Bitcoin holdings.

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