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Ark ups bet on Tesla despite suffering largest one-day outflow on record

Published 02/24/2021, 04:28 AM
Updated 02/24/2021, 02:15 PM
© Reuters. Logo of Tesla is seen at a branch office in Bern

© Reuters. Logo of Tesla is seen at a branch office in Bern

By Thyagaraju Adinarayan and David Randall

LONDON/NEW YORK (Reuters) - The largest outflow on record for Cathie Wood's ARK fund was not enough to stop the firm from increasing its bet on Tesla (NASDAQ:TSLA) Inc after the electric carmaker's stock closed below $700 for the first time this year on Tuesday.

Wood, whose $26.6 billion ARK Innovation exchange-traded fund (ETF) was the top-performing actively managed U.S. equity fund tracked by Morningstar last year, bought $171 million of Tesla shares, pushing its weight to about 10% of the fund.

Shares of the carmaker jumped 4.7% in afternoon trading on Wednesday, helping erase some of the steep losses ARK has suffered over the last week as momentum stocks have pulled back sharply.

The sell-off triggered heavy trading, with $5 billion of ARK Innovation shares changing hands on Tuesday - more than double the previous session's volume. The fund dipped slightly on Wednesday, pushing its loss to nearly 9% for the week to date.

Investors pulled $465.3 million from the ARK Innovation fund on Tuesday, according to Refinitiv Lipper data. Morningstar said Tuesday was the fund's biggest daily outflow on record. Out of the last 35 trading days, the fund has witnessed only five daily outflows and attracted $5.691 billion in new investor dollars through Feb. 23.

Bets on companies that have thrived during the pandemic including Tesla, streaming company Roku (NASDAQ:ROKU) Inc and payments company Square Inc (NYSE:SQ), have helped the fund's assets swell from $1.8 billion at the end of 2019 to $27.6 billion through mid-February of this year, according to Lipper.

Meanwhile, short interest in the fund's shares showed a massive spike, with 100% of the shares available for shorting currently out on loan, FIS Astec Analytics data showed.

Short sellers typically borrow and sell shares they expect to fall in value, hoping to buy them back at a lower price to pay back the loan and pocket the difference.

David Lewis of FIS Astec Analytics said his firm's data on borrowing costs suggests potential buying of the ETF as the price falls.

According to Ark Invest's website, the Tesla share purchases were carried out in three instalments worth about $124 million, $39 million and $8 million. On the same day Ark Invest's funds also sold $126 million of Taiwan Semiconductor's U.S.-listed shares.

Ark Invest now holds a more than 0.5% stake in Tesla for a weighting of 6.6% across all its funds.

© Reuters. FILE PHOTO: A Tesla sign at the carmaker's branch office in Bern, Switzerland

The ARK Innovation fund has large positions in so-called momentum stocks, which tend to attract investors based on thematic trends rather than fundamentals or valuation.

Latest comments

Cathie Wood should be investigated for market manipulation. She is purposely posting her firms investments on the day it happens which is something that has rarely been seen. The reason for this is the media attention she has received for her investment strategies, which in turn has caused millions of novice investors to blindly follow. While ARK Investment has bought their TSLA stock at $613 per share the novice followers are manipulated into following her lead and are therefore buying it, purposely driving the price higher to ARK's benefit. jmo
Watch it fly to 900 soon
March, tsla will go back to 900
don't follow the crowd, this the first wall street rule, never into Cathie and her ARK thing, fundamentals didn't change and will never do. I'm sticking with Vanguard. slow and steady.
I’m retired at 26, have fun with slow and steady!
you will go back to work soon my friend. I'm sure about this.
how was this financed? from the cash holdings, leverage/margin or sold some other stocks?
She should buy Dogecoin also,If you buy Palantir, TeslaDoge is next
Hopefully not on ATH. :))
she needs Tesla stock going up or ark will fail
Cathie will prove she is right again...
So it's like saying that a person with a porfolio of 26.000€ decided to invest 146buks in Tesla!! Waw that's a risky one :-)
sorry 124 even less :-)
Cathie continuing the ponzi party
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