November 27, 2022

Eureka News

All the News All the Time

Cathie Wood’s VC fund conducts LBOs

2 min read

Cathie Wood has strong opinions on INNOVATION. Earlier this year, she created the ARK Venture Fund to invest in both public and private tech companies and “double down on innovation,” as she told CNBC at the time.

Fundraising was tepid as the fund had just $8.3 million under management at the end of October. The capital burn in Ark Invest’s Hall of Famer doesn’t seem to have deterred investors – the flagship ETF continued to attract masochistic punters this year despite a 61% loss – so the 2.74% management fee (! ) and the total expense ratio of 4.22 percent (!!), which hinders the accumulation of assets.

However, Ark Invest remains admirably transparent about what it does. The latest factsheet reveals an interesting joint-top holding (apart from cash and alongside Freenome, a private British biotech company):

© H/T Tanay Jaipuria.

(H/T Tanay Jaipuria)

The ARK Venture Fund is believed to have acquired this $1 million Twitter holding sometime between its September 23 launch and late October.

During that period, Twitter went from about $41 per share to over $52 on Oct. 4 when Elon Musk finally stopped suppressing his own takeover bid and $53.70 on Oct. 27 when the bid took effect. (The shares will be officially delisted from the NYSE on Nov. 8.)

Was this an arbitrage play based on Wood’s belief that her pal Musk would eventually stop fooling around? If she had bought Twitter stock before October 4th, Ark would certainly have made a nice profit on the bet.

But we’re not exactly sure that M&A around a 16-year-old Silicon Valley heavyweight is exactly the “democratization of venture capital” that Wood promised investors.

The ARK Venture Fund’s own website now lists Twitter among its private investments, suggesting that Wood acquired the stake in order to bring it into the private company along with fellow financiers Prince Alwaleed bin Talal and Jack Dorsey (although their stake the eclipsed by Ark’s $1M punt).

Wood also appears to describe Musk’s vision of Twitter as “all apps‘, similar to Tencent’s WeChat in China. Here’s what she said at a conference in Portugal yesterday, according to CNBC:

“Remember [Musk] started in the payments industry. . . he sold his company to PayPal,” Wood said. “He and [Twitter co-founder] I think working with Jack Dorsey could make this a super app.”

Still, we’re also not sure whether engaging in a mammoth leveraged buyout falls under the democratization of venture capital. Or maybe Twitter rolling out a blue tick for $8 a month counts as “doubling down on innovation”?

Copyright © All rights reserved. | Newsphere by AF themes.