Michael Burry of ‘Big Short’ Makes $31 Million Bet Against Crypto-Friendly ARK Invest
Scion Asset Management, Michael Burry’s famed hedge fund, bought up bearish put contracts against 235,500 shares of the ARK Invest’s flagship Disruptive Innovation (ARKK) exchange-traded fund (ETF) at the end of Q2 2021.
The position was valued at almost $31 million, according to a filing with the U.S. Security and Exchange Commision (SEC) submitted by Scion on Monday.
A put contract gives Scion the right to sell ARKK stock at a previously agreed price before a certain date. If the value of the ARK Innovation’s shares drop below the threshold before the options expire, the hedge fund can sell them for a profit.
The fund’s largest position is in Elon Musk’s Tesla with a weight of over 10%. It’s joined by the likes of Coinbase and Jack Dorsey’s Square which both enjoy a weighting of 4.96% and 4.26%, respectively.
Among ARKK’s other top picks is Twitter, which earlier this year said it was considering investing in Bitcoin as well.
This gives Cathie Wood’s firm a strong exposure to Bitcoin as both Tesla and Coinbase hold crypto on their balance sheet.
ARKK, which is listed on NYSE Arca, fell 2.6% to $116.98 at the close of Monday’s trade amid broad tech-stock drops. Tesla also declined 4.32% as the U.S. auto safety regulators on Monday opened a formal investigation into the firm’s autopilot system.
ARK Invest attracts new bears
Michael Burry’s latest wager against ARKK is likely to be related to his earlier statements, in which he said that Tesla's valuation isn't sustainable.
He also drew parallels between the hype around Tesla and the dot-com and housing bubbles, telling shareholders to "enjoy it while it lasts."
Per Monday’s filing, at the end of June Scion Asset Management held bearish put options on nearly 1.1 million shares of Tesla worth $731 million. This represents a massive 35% of the firm's more than $2 billion in assets under management (AUM), and a 34% increase from the first quarter.
Burry, who rose to fame after being immortalized in Michael Lewis' book and the Oscar-winning movie "The Big Short," has earlier expressed his conviction that ARK Invest “is defining an era.”
However, as he tweeted in February pointing to the failure of Gary Pilgrim and his PBHG Growth in the 1990s among others, "if you know your history, there is a pattern here that can help you. If you don't, you're doomed to repeat it."
— Michael Burry Archive (@BurryArchive) February 5, 2021
ARK Invest, which has over $52 billion in AUM, is mainly focusing on high-growth innovation-driven stocks, with several companies in the firm’s funds boasting returns of more than 100% last year.
Despite Burry’s largely bearish position, Wood’s firm shows no signs of backing down from its thesis.
Most bears seem to believe that inflation will continue to accelerate, shortening investment time horizons and destroying valuations. Despite what we believe has been a supply-chain related/short term burst in inflation, both equities and bonds have appreciated since March➡️ https://t.co/K92t7KxT99
— Cathie Wood (@CathieDWood) August 17, 2021
On Monday, ARK Invest snapped up another 149,695 shares of Square worth about $40 million, with the largest purchase of 114,782 shares added to ARKK.
The remainder of the stock, according to data revealed by Ark Invest, was assigned to the company’s Fintech Innovation ETF (ARKF).
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