Latest News

Tesla Slump Heaps Pain on Cathie Wood’s Struggling ARKK Fund


(Bloomberg) — A double-digit drop in Tesla Inc. shares on Thursday has added to a nightmare start to the year for Cathie Wood’s flagship strategy.

Most Read from Bloomberg

Apple to Rival Square by Turning iPhones Into Payment Terminals

How a Fox News Interview Threw the Antiwork Subreddit Into Chaos

Crypto Secrecy Makes DeFi a Financial Felon’s Wonderland

Stocks Drop in Roller-Coaster Ride for Wall Street: Markets Wrap

Megacap Tech Drives Stocks Toward Best Day in 2022: Markets Wrap

Elon Musk’s electric-vehicle maker is arguably Wood’s highest conviction bet and the biggest holding of the ARK Innovation ETF (ticker ARKK), which has plunged in January as investors dump expensive-looking and speculative tech bets. Yet until now, Tesla’s drag on the fund in 2022 had been modest.

That changed Thursday after Tesla’s fourth-quarter earnings and outlook underwhelmed investors — triggering a 12% drop in its shares. The move added almost a full percentage point to ARKK’s own decline, according to data compiled by Bloomberg.

The ETF closed down 3.9% as U.S. megacap stocks fell anew.

ARKK has slumped 30% this year through Thursday, with Tesla accounting for about 1.74 percentage points of the decline — up from 0.91 percentage point on Wednesday. That makes it the third-largest drag on the ETF in 2022, after Roku Inc. and Coinbase Global Inc.

Wood’s oft-repeated mantra is that her firm ARK Investment Management invests with at least a five-year time horizon, and that volatility in their equity picks is expected. The firm frequently uses drawdowns to add to its favorite holdings, and its daily trading statement shows it added about $27.8 million of Tesla on Thursday, based on the carmaker’s closing price.

It has also trimmed winning positions when they threatened to become too big. This has included generally keeping Tesla below 10% of ARKK.

On Friday the ETF dropped 1.7% as of 9:44 a.m. in New York. Tesla fell 3%.

(Updates with Friday trading, details of Tesla share purchases.)

Most Read from Bloomberg Businessweek

Pharmacy Workers Are the Pandemic’s Invisible Victims

China’s American-Born Olympic Star Is Being Very Careful

Market Turmoil Is Ultimate Test of What’s Real and What’s Not

What Happens When Russian Hackers Come for the Electrical Grid

Amazon’s Banned China Sellers Turn to Walmart’s Marketplace

©2022 Bloomberg L.P.

‘The company is a household name’: My husband’s tech firm gave him stock. It’s now 40% of our net worth. Should we diversify or hold?

Previous article

3 “Strong Buy” Stocks That Are Poised to Benefit From the Coming Rate Hikes

Next article

You may also like


Leave a reply

Your email address will not be published. Required fields are marked *

More in Latest News