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The high-flying $26.6 billion ARK Innovation ETF, one of the best performing exchange traded funds in 2020, fell sharply this week along with Tesla, which makes up about 10% of the fund, as momentum stocks pulled back sharply.
According to the fund’s website, the Tesla share purchases were carried out in three separate instalments worth around $124 million, $39 million and $8 million each. On the same day Ark Invest’s funds also sold $126 million worth of Taiwan Semiconductor shares.
ARK Invest holds about 0.5% stake in Tesla, weighing 6.6% across all its funds.
Tesla shares rose 2.6% in U.S. premarket trade on Wednesday after falling as much as 13.4% in the previous session, dragged down by heavy losses in Bitcoin in which Elon Musk’s company recently invested $1.5 billion.
The ARK Innovation fund has large positions in so-called momentum stocks, which tend to attract investors based on thematic trends rather than fundamentals or valuation.
Short interest in the fund’s shares showed a massive spike with 100% of the shares available for shorting currently out on loan, FIS’ Analytics data showed. Short sellers typically borrow and sell shares they expect will fall, hoping to buy them back at a lower price, pay back the loan and pocket the difference.
