Block, a financial services and digital payments company, is potentially set to become the first company with a clear Bitcoin strategy to join the S&P 500, according to Matthew Sigel, the head of digital assets research at VanEck.
Sigel explained that there are several criteria that a company must meet in order to be added to the index, which tracks the largest 500 companies in the U.S. based on market capitalization.
To qualify, a company must have a market capitalization of over $18 billion, a public float of at least 10%, positive earnings in the most recent quarter, and positive GAAP earnings over the last four quarters. Additionally, the company must have high liquidity, be public for more than 12 months, and be based in the U.S.
Sigel stated that Block is expected to meet the earnings criteria by the first quarter of 2024. However, he noted that S&P 500 inclusion is not solely based on a formula and is ultimately decided by the Index Committee.
Sigel mentioned that companies meeting these criteria have historically been added to the index within a timeframe of three to 21 months. When discussing Tesla, he highlighted that while Tesla holds Bitcoin, it does not have a specific Bitcoin strategy like Block, which allocates 10% of its monthly Bitcoin profits to Bitcoin investment on a recurring basis.
Although Coinbase also meets the criteria, Sigel suggested that it could be a more controversial choice for the committee due to its focus on the crypto industry. He also noted that the S&P 500’s diversification efforts could allow for more financial firms to be included in the index, as financial companies currently make up about 14% of the index.