Does Michael Saylor's MSTR Stock Face Valuation Risk Due to Heavy Reliance on Passive Funds? Top Analyst Thinks So: 'If The Bitcoin Price Falls…'

JPMorgan suggests that investors are indirectly exposed to Bitcoin BTC/USD through their investments in Strategy Inc. MSTR, with the passive ownership posing a risk to the stock.

What Happened: JPMorgan’s research, led by Nikolaos Panigirtzoglou, revealed that investors have poured as much as $50 billion into MicroStrategy, a company that has shifted its focus to Bitcoin, MarketWatch reported.

These investments are indirect, as around $14 billion worth of MicroStrategy shares are held by mutual funds or exchange-traded funds (ETFs) that track an index featuring the company. This figure could be even higher, as it excludes passive or active funds that hold MicroStrategy without it being part of their benchmark, as well as institutional investors such as Norges Bank and the Swiss National Bank, which are mandated to follow index compositions.

When these additional factors are considered, the total investment in MicroStrategy could be closer to $50 billion, a significant portion of the company’s $100 billion market cap.

The heavy reliance on passive funds, which make up a fifth of the company’s ownership, poses a risk to MicroStrategy’s valuation. The company’s presence in equity indices exposes it to the risk of removal if it no longer meets the index criteria or if those criteria are revised in the future.

“If the bitcoin price fails to achieve sustained and strong annual appreciation in the future, preferred stock issuance and the MicroStrategy stock price could come under severe pressure,” warned JPMorgan.

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Why It Matters: MicroStrategy’s aggressive Bitcoin accumulation has been a topic of concern for some time. Digital asset bank Sygnum warned that the company’s Bitcoin accumulation could undermine the asset’s potential as a reserve asset for central banks and other institutions.

Despite these concerns, MicroStrategy has continued to expand its Bitcoin holdings, recently acquiring an additional 10,100 Bitcoin for approximately $1.05 billion. This brought the company’s total holdings to 592,100 BTC, with a cumulative cost of $41.84 billion and a yield of 19.1% in 2025.

MicroStrategy’s CEO, Michael Saylor, has been a vocal advocate for Bitcoin, stating that he sees a ‘very safe’ upside to the company’s Bitcoin strategy. However, JPMorgan’s recent findings suggest that the company’s heavy reliance on passive funds and preferred stock financing could pose a significant risk to its valuation.

Benzinga's Edge Rankings place MicroStrategy in the 95th percentile for momentum and the 3rd percentile for growth, reflecting mixed performance. Check the detailed report here. 

On a year-to-date basis, MSTR stock surged 23.01%.

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.