Companies that get stricken off are those that fail financial and operational tests across two consecutive review periods.
JPMorgan predicts $2.8B liquidation risk
JPMorgan now estimates that Strategy’s removal from MSCI indexes could trigger $2.8 billion worth of liquidations. The company came up with the figure by analyzing the passive funds tracking the MSCI USA Index and MSCI World Index. These funds hold about 13 million shares of Strategy (3.1% of the basic shares outstanding).
Since ETFs mirror index allocations, a deletion would require these companies to dispose of those shares, igniting high selling pressure.
What’s worse, if competing providers like FTSE Russell or S&P Dow Jones implement similar measures, outflows could…