Cathie Wood In The HOOD: ARK Buys Over 3 Million Robinhood Shares Following IPO
(Submitted by Eric Ladny at The News Rundown Substack)
ARK Invest and its CEO Cathie Wood wasted no time diving headfirst into the Robinhood (HOOD) IPO buying over 3 MILLION shares of stock in the notorious financial services company during its first two days of public trading.
Blasting into a newly public stock is nothing new for “Queen Cathie” or “Crazy Cathie,” depending on one’s point of view. Earlier this year she began buying shares of Coinbase (COIN) on April 14th, the day of that company’s Direct Listing. Despite being one of the first to the “party” on $COIN, up to this point nearly four months later, her decision to begin buying into the stock on Day 1 has proven to be a poor one.
$COIN traded as high as $429/share on its first day of trading before closing at $328. On that day, Wood’s ARK Invest scooped up 692,708 shares, but she was far from done growing her position. By the end of trading on May 7th, ARK Invest had purchased 2,853,871 shares of $COIN. Well over half of these buys were made with $COIN trading above $300. The stock traded as low as $208 on May 19th and has now closed trading for the month of July at $236. The stock has not closed above $255 on any trading day since May 14th. As of the end of July, ARK holds 5,085,493 shares in $COIN which equates to a market value of over $1.2 billion. With the free float outstanding at 139 million shares, ARK owns over 3.6% of these shares making them a major holder in the company, and in all likelihood, the largest current “bag holder.”
Should $COIN make a major upward move in the near future, Wood’s “Buying the Dip” strategy may be another sign to her supporters that she is a step ahead of the market. But even if this does occur, the timing of Wood’s $COIN buys leaves a lot to be desired about the investment decision making at ARK Invest.
This brings us back into the $HOOD which went public on July 29th. Following in the footsteps of their $COIN buy strategy, Wood and ARK were at it again, buying 3,152,517 shares of $HOOD in its first two days of public trading. With the stock closing the week at $35/share, ARK is already holding over $110 million worth of $HOOD stock.
The question now becomes, will $HOOD follow $COIN and embark on a downward journey, or have Wood and her team of analysts timed this one correctly? While the future direction of $HOOD stock is anyone’s guess, what we can confidently predict is that if the stock dips down to $30 and below, ARK will continue loading up on shares and averaging down its per share cost basis.
Earlier this year, Wood referred to her team of young, fresh out of college analysts as ARK’s “Secret Weapon.” Perhaps she is correct, and these young-guns do give ARK a competitive advantage in the world of investing. But it also appears possible that Wood is only seeing a portion of the puzzle with her overall strategy. None of these 20-somethings have ever invested through a true bear market. If ARK faces real adversity over an extended period of poor performance, will Cathie’s “Secret Weapon” analysts have the resolve to appropriately recalibrate for a changing environment? Surely Wood’s wonder-kids wouldn’t abandon her and exit stage left à la Simone Biles, right? After all, as we’ve repeatedly been told, “It’s a new generation.” TBD…
Wood claims that the SOLE FOCUS of ARK Invest is “Disruptive Innovation” which suggests that she and her team of analysts believe $HOOD falls into this category. What makes Robinhood a “Disruptive Innovation” company in 2021, besides infuriating a large number of retail investors by ‘disrupting’ their trading activity during the GameStop saga, is unclear, but CEO Vlad Tenev and his team certainly do have a great deal of data on how younger, less experienced investors/gamblers behave on their platform. With that said, hopefully none of Cathie’s analysts actually trade on Robinhood, but would you really want to bet against it at this point? While we are on the topic, does either DraftKings or Barstool have a betting line for the over/under on ARK analysts who have active Robinhood accounts? Get on it Portnoy, I want OVER 3.5/-105.
There is no debating that ARK Invest had exceptional returns in 2020, returning over 100% for the calendar year in each of its five main funds. However, to date in 2021, this performance has not been replicated as all of these funds have either had single digit positive or negative returns. The flagship ARK Innovation ETF (ARKK) is currently down 3.8% YTD and down 25% from its all-time high on February 16th, but is up 23% from its 2021 low which was hit on May 13th.
While ARK Invest remains a popular investment option for many investors, especially younger ones who get excited by the idea of investing in “Disruptive Innovation,” their 2021 buy/sell decisions in $COIN and other stocks such as DraftKings (DKNG), Skillz (SKLZ), and Teladoc (TDOC), to name a few, seem “questionable” to put it nicely.
So what exactly is the allure of buying into Wood and the ARK Invest ETF’s? Investing in “Disruptive Innovation?” Believing Wood’s contrarian prediction that we are on the cusp of economic DEFLATION? A $3000/share price target on Tesla (TSLA) when the stock is trading under $700 with a triple digit P/E?
No one sees the full picture, and perhaps I am off base in my critiques, which is entirely possible and fine by me. I enjoy learning and look forward to doing so while following the future progress of ARK Invest. In the meantime, I may buy some $ARKK puts in case the market takes a tumble and Cathie’s flagship fund aggressively follows suit.
Prove me wrong Cathie Wood and all the ‘Young Gun Analysts’ at ARK Invest! Let’s see if you are all as smart and prescient as many in the financial media have attempted to make non-professional investors believe…
FULL DISCLOSURE: ABSOLUTELY NONE of this is Financial Advice. For the love of GOD, please do your own due diligence. I am just a bro who played poker professionally for 10 years, graduated with a Finance degree from Penn State in 2011, recently became interested in financial markets, and likes memes. I currently have NO position in HOOD, COIN, DKNG, SKLZ, TDOC, TSLA or any of the ARK ETF’s. However, I am strongly considering buying ARKK puts in the near future.
Mon, 08/02/2021 – 11:35