Ark Invest has been steadily trimming its stake in Twitter and appears to be ready to ditch holdings in the microblogging platform altogether — at least for now.
The tech-focused investment management firm’s Chief Executive Officer Cathie Wood told Yahoo Finance in an interview Tuesday that Ark is moving out of social media platforms amid increased competition and chalked up its sales of Twitter (TWTR) stock in particular to the departure of former CEO Jack Dorsey.
“Jack's leadership was very important to evolving Twitter to where it was, and we thought his idea of opening up to crowdsource the oversight of the behavior on the platform was moving in the right direction,” Wood told Yahoo Finance’s Julie Hyman in a sit-down interview. She added that the first few things the firm saw after the appointment of new CEO Parag Agrawal was “more censorship.”
Ark Invest dumped 185,900 shares of Twitter stock on Monday, according to its own trading data, accelerating a selling spree of the social media giant that began late last year shortly after Dorsey stepped down from the company in November. The most recent sale brings Ark’s total liquidations of Twitter this year to 90% of its holdings.
It also comes following news earlier this week that Tesla CEO Elon Musk rejected an offer from Agrawal to join Twitter’s board after the electric vehicle executive announced his purchase of a 9.2% stake in the social media platform, making him a majority shareholder and raising the likelihood Musk could be an activist investor in Twitter.
Wood told Yahoo Finance Musk’s moves were telling of Twitter’s “regulatory environment.”
“It could be that Elon wants the freedom to speak freely about Twitter and how he thinks it should evolve, and as a director, he might actually be hamstrung,” she said. “I would imagine that's top of mind.”
Shares of Twitter surged as much as 27% following the initial announcement of Musk’s stock purchase April 4 and 4% on Monday after news he decided not to join the social media company's board — with Ark missing out on both of those rallies.
Ark Invest previously held Twitter shares across three of its active exchange-traded funds — the Ark Innovation ETF (ARKK), the Ark Next Generation Internet ETF (ARKW) and the Ark Fintech Innovation ETF (ARKF) — but has fully terminated the exposure for ARKK, its flagship fund.
Had Wood retained the roughly 2% holding it had in Twitter at the end of last year, the gains would have brought the total value of its stake to $700 billion, compared to about its current $50 million in remaining holdings across ARKF and ARKW. The allocations would have been a much-needed bump for the investment manager, whose nine exchange-traded funds have posted an average loss of about 25% year-to-date, and ARKK alone down 36% year-to-date, as of Tuesday’s close.
The firm’s move out of Twitter, however, isn’t isolated. Wood told Yahoo Finance Ark Invest has started moving out of most social media platforms, citing increased competition. The firm has also sold off its earlier stake in Meta Platform’s (FB). Wood pointed to revenue headwinds in the first quarter in the interview.
“That was shocking and really brought to light TikTok is taking a lot of oxygen out of the room,” she said.
Although the firm is rotating out of social media, Ark’s CEO said a continued push into crypto by Twitter — the company announced a new NFT (non-fungible token) verification service for profile photos earlier this year — and changes to its business model could renew the firm’s interest.
“One of the reasons we did hold Twitter is we thought it would be a good platform for NFT verification,” she said. “If we saw Twitter insinuating itself into that world aggressively, we might become more interested.”
“But I am interested in seeing how they do evolve the platform,” Wood added, indicating the company could benefit from a shift to a subscription service versus relying on advertisers. “That would be a huge transition — it might be interesting.”
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc