In a recent post, Matthew Sigel, who leads digital assets research at renowned investment firm VanEck, suggested a groundbreaking shift in the financial landscape. He proposed that Block, formerly known as Square, might soon become the first company in the S&P 500 to hold Bitcoin. This assertion, shared through his social media platform, has stirred considerable interest and discussions across the financial community.
The Requirements for S&P 500 Inclusion
Sigel emphasized that a company’s inclusion in the S&P 500 is contingent upon meeting six key criteria. These determinants include:
- A market capitalization exceeding $18 billion.
- A public float greater than 10% of the company’s total shares.
- Positive earnings in the most recent quarter, complemented by positive cumulative GAAP earnings over the previous four quarters.
- High liquidity to ensure the stock can be easily traded.
- An IPO seasoning period of over 12 months.
- Domicile in the United States.
Block successfully met the earnings criteria following their Q1 2024 earnings report. However, the S&P 500 inclusion is not an automatic process and remains subject to the discretion of the Index Committee. Typically, companies that fulfill all the requirements are inducted within a period ranging from 3 to 21 months, with rare exceptions like LULU, which took 65 months to be included.
Sector diversification is another significant factor for the Index Committee, as they strive to align the S&P 500’s sector composition with the broader economy. Notably, Block made a substantial investment in Bitcoin, purchasing $50 million worth in October 2020, followed by an additional $170 million in February 2021. CEO Jack Dorsey has consistently been a strong advocate for Bitcoin, further reinforcing Block’s potential as a pioneering Bitcoin holder in the index.
Is MicroStrategy or Coinbase a Contender?
MicroStrategy (MSTR), a prominent corporate Bitcoin holder, was recently added to the Nasdaq-100, but its inclusion in the S&P 500 appears unlikely despite robust performance in 2024. Eric Balchunas from Bloomberg speculated that the S&P 500 inclusion committee might not approve MSTR even if it meets all the qualifications. Meanwhile, Bitwise has forecasted that Coinbase could join the S&P 500 this year.
In response to one of Sigel’s followers questioning Coinbase’s potential inclusion, Sigel acknowledged that while the crypto firm meets all six criteria, it remains a “controversial pick” due to its “pure-play crypto exposure.” This highlights the ongoing debate about the acceptance and integration of cryptocurrency-focused companies within traditional financial indices.
The prospect of Block becoming the first Bitcoin holder in the S&P 500 signifies a potential shift in the financial industry’s approach to digital assets. As the discussions continue, the financial world eagerly awaits the Index Committee’s decisions, which could pave the way for greater cryptocurrency adoption among major corporations.
