Cathie Wood's ARK Innovation (ARKK) Exchange-Traded Fund Loses Investor Confidence
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This year is exceptional in terms of many events, in particular events on the financial markets. ARKK is not doing too well, and Microsoft will take 4% stake in the London Stock Exchange.
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The Losses
Investors have bought up growth stocks and other speculative assets en masse this year. In an environment of rising profits where they suddenly have opportunities to earn returns with little risk, many lose their appetite for cash-losing companies that promise a chance of return in the future.
Shares in the fund, a pandemic-era favourite, made up mostly of underperforming, growth-minded tech companies, have fallen 63% this year. Wood's flagship fund is near a five-year low. The three largest holdings in the fund - known by the ticker symbol ARKK - are Zoom Video Communications Inc., Tesla Inc. and Exact Sciences Corp. , companies that Mrs. Wood believes have the potential to change the world.
At the beginning of the year, Cathie Wood said that venture stocks in exchange-traded funds sold by ARK Investment Management LLC are so cheap that they will inevitably go up. A surprising number of investors wanted to give it a try.
Some $16 billion flowed into ARK Innovation from the second quarter of 2020, when the Covid-19 pandemic took hold, through the first quarter of 2021, when the fund’s assets peaked at $28 billion.
Investors heeding a “buy the dip” rallying cry poured money into the fund in each of the first five months of the year—a net $1.89 billion—as markets tumbled.
Shares of Zoom and Tesla have lost about half their value this year, while Exact Sciences, an unprofitable supplier of cancer screening and diagnostic tools, is down 42%.
While many on Wall Street are curbing risks and preparing for a recession, Ms. Wood has increased her risk in recent weeks by buying more shares in cryptocurrency exchange Coinbase Global Inc. and a bitcoin futures ETF.
According to FactSet, ARKK added 931,000 Coinbase shares worth about $43 million in November. ARKK is the second-largest holder of Coinbase shares, which are down 83% since the beginning of the year.
Similar bets yielded huge gains in a low-interest-rate environment in 2020 and 2021. ARKK's stock more than doubled in 2020 before concerns about inflation — and the prospect of higher rates — stalled its gains.
Currently, ARKK is at its lowest levels, approaching pre-2018 levels. The lowest levels of the year may increase investors' concerns.
ARK Innovation ETF (ARKK)
Microsoft Corp and LSEG
Microsoft Corp. will take a 4% stake in the London Stock Exchange’s corporate parent.
The agreement between the London Stock Exchange Group and Microsoft Corp connects one of the largest American technology companies with the largest market exchange in Europe.
LSEG has tied its future to data sales, a way to diversify away from the low-margin stock market business. In 2021, it completed the purchase of the financial, information and terminal company Refinitiv Holdings Ltd. from the Blackstone Inc. consortium. and Thomson Reuters Corp.
Microsoft takes the unusual step of buying an ownership stake in a customer by acquiring LSEG's stake from the Blackstone-Reuters consortium. Microsoft did not disclose how much it will pay for the shares.
LSEG shares were up 1.8% Monday afternoon in London.
Source: wsj.com, finance.yahoo.com
