JPMorgan Bought More MicroStrategy Before MSCI Exit, Plus Insurance Against a Drop
JPMorgan boosted its MicroStrategy shares by 36% and put options by 60% before MSCI announced the stock's removal from its index.
The bank held 848,932 MicroStrategy shares worth $131.3 million at the end of September, up from 624,387 in June. Its put options, which act as insurance against price drops, covered 1,148,500 shares, more than the shares it owned outright.
Index Removal Impact
JPMorgan's own analysts estimated that losing the MSCI index spot could force index funds to sell approximately $2.8 billion of MicroStrategy stock. MSCI confirmed the removal on Wednesday, citing that companies primarily holding assets rather than operating businesses no longer qualify.
While not material to $MSTR, the proposal is misguided, flawed, and conflicts with established securities laws and accounting principles.
Market Reaction
Following the MSCI announcement, MicroStrategy shares fell 6% to about $115. At this price, JPMorgan's September stake would be worth approximately $97.6 million, down from $131.3 million.
The forced selling from index funds is scheduled for November 30. By November 16, other major money managers must disclose their September holdings, revealing whether they increased their positions, bought protection against price drops, or both.
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