Cathie Wood Sold Tesla — Reasons Behind Her Move

Rachel Curry - Author
By

May 11 2022, Published 11:04 a.m. ET

After years of bullish loyalty to Tesla Inc. (TSLA), Ark Invest founder and CEO Cathie Wood is switching up her strategy. She sold Tesla stock in exchange for another EV opportunity.

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Here’s why Wood sold TSLA, plus whether her flagship ARK Innovation ETF (ARKK) will recover after losing a majority of its value.

Cathie Wood’s Ark Invest sold Tesla stock in exchange for GM.

As Ark Invest’s chief investment officer and CEO, Wood made the decision to sell a whopping 15,862 shares of TSLA stock, worth $12.7 million at the time of sale. The investment firm reported the sale but didn't specify which of her ETFs the Tesla stock dump stemmed from.

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Historically, Wood has taken periodic profits from the firm’s Tesla holdings. However, this is a much bigger sell-off than just a little off the top.

In place of Tesla stock, Wood invested in General Motors (GM). A more-than-century-old company, GM is making major strides towards becoming an all-electric automotive manufacturer. In early January 2021, GM CEO Mary Barra announced that the company would stop selling vehicles with traditional initial combustion engines and become an all-electric operation by 2035. Wood added the GM shares to the ARK Autonomous Technology and Robotics ETF due to the company’s 80-percent ownership of autonomous vehicle company Cruise.

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TSLA stock is down more than 15 percent in the week ending Wednesday, May 11 — part of a larger YTD slide consistent with bearishness in big tech and the broad market. Meanwhile, GM is down 5 percent in the past week and got a 2-percent bump in the last two market days.

ARKK is down more than 75 percent.

As of May 11, ARKK peaked at $156.58 on February 12, 2021. Since then, the shares have dropped nearly 75 percent. Despite the ongoing downward pressure, investors have pumped $1.3 billion into ARKK since the start of 2022.

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Investors continue to trust Wood’s active management strategy as the market struggles in what many experts are calling a "pre-recession." That loyalty will only go so far. Wood will have to prove herself in the long term and eventually increase the ARKK fund’s $8.8 billion in assets under management back toward (and, fingers crossed for investors, well above) its $28 billion high.

Lately, Wood’s strategy has been thrown off by factors like hyperinflation (with the cost of living surging 8.3 percent in the last 12 months, according to the latest consumer price index data), quantitative easing, and rising interest rates, among other economic factors.

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Will ARKK recover after Wood’s Tesla sell-off?

In early May, Wood said in a video, “Ark is net inflowing this year, and I think it's because we give away our research, and our research is unique. It's original research. And we're trying to help people understand how the world is going to change during the next five to 10 years, and how rapidly it's going to change.”

These net inflows suggest that Wood’s flagship ARKK fund can recover. Analysts predict that the fund’s 12-month trajectory is sitting at about 36 percent in the green, so profitability depends on your entry point. ARKK isn't going to benefit from any projected GM gains as the robotics fund gets that stock, so its strategy must lie elsewhere.

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