ARK Innovation ETF (ARKK) - Get ARK Innovation ETF Report shares fell to the lowest levels in nearly two months Friday as the high-profile fund continues to absorb losses on two of its key holdings and investors pull cash out at a record rate.
Cathie Wood, one of last year's standout fund managers and the head of the $60 billion stable of funds, has been a long-time proponent of both Tesla Inc. (TSLA) - Get Tesla Inc. Report and Bitcoin, two of her fund's key assets.
However, with Bitcoin now down more than 20% from its early February peak, and Tesla trading at its lowest levels since mid-December, Wood and the ARK funds are taking on water and losing investors confidence: some $200 million was withdrawn from ARK yesterday, according to Bloomberg data, and $443 million from the five funds in total.
That adds to the record $465 million that was taken out earlier this week.
All of the top ten holdings in the flagship ARK Innovation fund -- including Roku (ROKU) - Get Roku Inc. Report, Square (SQ) - Get Block Inc. Class A Report, Zillow Z and Shopify (SHOP) - Get Shopify Inc. Class A Subordinate Report-- traded notably lower on Thursday, with Tesla leading the decliners with its 8% slump.
By contrast, data from Bank of America's weekly 'Flow Show' report suggests investors are using this week's equity market pullback to put cash back into stocks, with $46.2 billion -- the third-largest on record -- finding its way into global portfolios.
Tech stocks are notably sensitive to interest rate hikes, given that their growth 'payoff' is often further into the future than traditional equities. This makes them less attractive, on a relative basis, when interest rates rise, as investors can get better near-term returns with less risk.
Yesterday, in fact, benchmark 10-year Treasury note yields traded at a higher rate -- 1.53% -- than the estimated dividend yield for the S&P 500.
Ark Innovation ETF shares were marked 3.5% lower in pre-market trading Friday, indicating an opening bell price of $125.03 each, the lowest since December 29 and a move that would extend its week-to-date decline to around 20%.
Tesla shares slipped 3.25% lower to $660.10 each while Bitcoin prices extended declines against a stronger U.S. dollar to trading just under the $46,000 mark.
Earlier this week, Wood's Ark Invest funds bought more than $170 million shares in the clean-energy carmaker during yesterday's billion-dollar sell-off.
Tesla, which unveiled the purchase of $1.5 billion worth of bitcoin earlier this month, must be held as a so-called 'intangible' asset on its corporate balance sheet. That means that, like the value of "goodwill", it can't be increased. However, it can be marked down when bitcoin prices decline, leaving Tesla's stock price at least partly-linked to bitcoin fluctuations.
Short-selling interest in Tesla remains robust, as well, at $36.9 billion -- or 6.73% of the outstanding float in play. Tesla shorts are, in fact, up to $1.18 billion on the year, according to data from S3 Partners, with $1.08 billion of that gain coming from yesterday's action alone.