As a business intelligence and analytics company, Microstrategy (NASDAQ:MSTR) has been listed on the Nasdaq since 1992. With its significant Bitcoin holdings, its market capitalization has now increased due to the high liquidity of daily trading volumes, making the company eligible for inclusion in the Nasdaq 100 index.

Microstrategy’s inclusion in the famous index will take effect on December 23, 2024.

The Nasdaq 100 index includes the 100 largest non-financial companies listed on the Nasdaq stock exchange. Although Microstrategy has bought a lot of Bitcoin, its business segments actually classify it as a technology company.

Due to its high daily trading volume and high market capitalization, Microstrategy is considered eligible to join the Nasdaq 100 club. In fact, another condition must be taken into account: a solid financial position with good corporate governance.

Microstrategy has suffered losses since 2020 and has been heavily indebted since this year, largely due to its aggressive investment strategy in Bitcoin.

Since 2020, Microstrategy has chosen the strategy of using Bitcoin as a treasury reserve, and to support Bitcoin purchases, they raised funds through debt issuance.

In 2023, Microstrategy appeared to have turned the corner and appeared financially poised to be included in the Nasdaq-100. But if we look closely, the net income of $429 million in 2023 didn’t simply arise from the company’s operations.

When operating income was just $804,000 and pretax income was negative $124.5 million, Microstrategy had net income of positive $429 million in 2023. I wonder why? A tax benefit of $553.6 million is the answer.

The Nasdaq-100 index is tracked by many exchange-traded funds (ETFs) and mutual funds, including Invesco QQQ Trust, ProShares Ultra QQQ and Direxion Nasdaq-100 Equal Weighted ETF. Inclusion in the Nasdaq 100 index will likely push the stock price even higher.

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This article first appeared on GuruFocus.