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ARK Invest's Cathie Wood.
Courtesy PhotographMichael Burry, the gutsy hedge-fund manager whose beingness was told successful the Oscar-winning biopic “The Big Short,” is taking purpose astatine prima banal picker Cathie Wood.
In a filing connected Monday, Burry disclosed that his firm, Scion Asset Management, held bearish enactment options against 235,500 shares of Woods’ actively managed ARK Innovation exchange-traded fund (ticker: ARKK) astatine the extremity of the 2nd quarter. The caller presumption was valued astatine astir $31 million, according to the quarterly filing, which is required for hedge funds supra a definite size.
A enactment declaration gives Scion the close to merchantability shares successful the ETF astatine a antecedently agreed terms earlier a definite date. If ARK Innovation’s shares driblet beneath the threshold earlier the options expire, the hedge money tin merchantability the shares for a profit.
Burry isn’t the lone capitalist betting that the terms of ARK innovation volition fall. The measurement of put options traded connected ETF is rising, portion the abbreviated involvement connected the ETF precocious reached a grounds high. There is adjacent a Short ARKK ETF successful the filing that, if approved by the Securities and Exchange Commission, would let retail investors—those who can’t merchantability shorts oregon commercialized options directly—to marque bearish bets against Woods.
Wood’s company, ARK Invest, took successful billions of caller assets past twelvemonth from spectacular performances by immoderate of her progressive ETFs focused connected high-growth innovation-driven stocks. Several were among 2020’s best-performing funds, with returns of much than 100%.
But the funds person struggled to support that momentum this year. Many of their stockholdings are trading astatine lofty valuations that are betting connected immense expected maturation successful the future. As ostentation flares up and involvement rates rise, however, the existent worth of the maturation companies’ aboriginal currency travel is being diminished. The ARK Innovation ETF is present 6% down for the year, with $500 cardinal plus outflows successful the past month.
Burry has been cautioning astir the unsustainable valuations of immoderate ARK holdings for months. He already holds large bearish positions against electrical car shaper Tesla (TSLA), 1 of the apical investments successful ARK ETFs. Monday’s filing shows that Burry accrued his bearish puts connected Tesla to astir 1.1 cardinal shares, up from 800,100 shares successful the archetypal quarter. Those bets are worthy $731 million.
Tesla shares person declined 2.8% twelvemonth to date, portion ARK Innovation has mislaid 6% successful value. Still, some are trading astatine overmuch higher levels compared to the commencement of 2020, up by 675% and 134%, respectively.
Burry became celebrated for successfully betting against the lodging bubble, which yet touched disconnected the fiscal situation successful 2008. His communicative is conscionable 1 of respective told by Michael Lewis successful his publication “The Big Short” and aboriginal made into a movie.
The financier was besides 1 of the archetypal big-name investors to stake connected GameStop successful 2020, which led to a buying frenzy successful the videogame retailer’s banal earlier this year. But Burry sold his full involvement earlier GameStop became a meme banal connected Reddit, missing retired connected the 2,000% surge.
Write to Evie Liu astatine evie.liu@barrons.com
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