Wood-Shed: ARKK Shaky Heading Into Friday’s Cash Open

We noted yesterday that with the NASDAQ red for the year, all eyes were going to be on ARKK’s high flying “Innovation ETF”, which plunged 5.3% on Thursday amidst a broader NASDAQ selloff. 

Despite the fact that, for the moment at least, NASDAQ futures are slightly higher heading into the cash open, Cathie Wood’s ARKK ETF is still red, and has been down between 0.1% to 1.5% ahead of the opening bell on Friday. 

With yesterday’s plunge, most of ARKK’s recent inflows appear to be underwater…

$ARKK inflows really started to accelerate from 12/1. The VWAP from that date is 137.50. The majority of volume now significantly underwater pic.twitter.com/bVP9itqCCY

— Thomas Thornton (@TommyThornton) March 4, 2021

And according to recent flow data, its funds saw about $628 million across five ETFs in outflows yesterday…

🚨🚨

Latest ARK Funds Flow data is in….
Almost $628MM outflows across all five funds.

1/ $ARKK with -$94.6MM pic.twitter.com/BB2qCFEpIA

— TC (@TESLAcharts) March 5, 2021

And as ARK’s trade updates yesterday seem to disclose, Wood’s strategy doesn’t appear to be changing. As we have been pointing out, that strategy appears to be selling large, liquid big cap names and rotating the cash into smaller, speculative, small cap names. 

Cathie Wood is legit selling all her liquid positions and doubling down.

Wow. https://t.co/GuOQhHqG8U

— HFI Research (@HFI_Research) March 5, 2021

ETF expert Eric Balchunas called it “nerves of steel”. That’s one name for it.

ARK selling the relatively safe mega caps and buying the banged up smaller stuff. Nerves of steel, altho that’s what got her here. https://t.co/VfrkTp10ZW

— Eric Balchunas (@EricBalchunas) March 5, 2021

And finally, yesterday, well known FinTwit personality @Keubiko penned an article called “Raiders of the Lost ARKK”, which laid out exactly how ARK’s flagship ETF could find itself in hot water, quickly and without much notice as a result of compounding liquidity issues. 

“It will be important to watch the daily flows in and out of this ETF, as outflows are currently modest relative to fund size, but could pick up pace if growth stocks continue to sell off,” Keubiko writes. “It appears that, like Janus, the ARK phenomenon is yet another example of the same mistake that investors have been making for decades: plowing into investments and funds AFTER they have had an epic run.”

“If investor outflows pick up the situation will get very interesting, as we haven’t yet seen anything close to wholesale liquidation in its holdings.”