Kathy Wood reconsiders strategy: betting on SpaceX instead of Tesla on the day of the historic IPO
On the long-awaited day of SpaceX's stock market debut, Cathie Wood, founder of ARK Invest, made a decisive move by reallocating capital in favor of Elon Musk's space company at the expense of his other venture, Tesla. This was a signal the market could not ignore.
On June 12, the day of SpaceX's IPO, ARK Invest purchased 3.29 million shares of SPCX at the offering price of $135, investing approximately $444 million. By the close of the trading session, this stake was valued at $529.7 million, indicating a 19% gain on the first day. Simultaneously, the fund reduced its holdings in Tesla, as well as in Advanced Micro Devices, Rocket Lab, Roku, and Baidu. Elon Musk's net worth exceeded $1 trillion for the first time that day.
Why is Tesla making way for SpaceX?
For a long time, Tesla shares were the anchor of ARK's portfolio, and Wood publicly defended the company even during its toughest times. However, the context has now changed. Chinese competitors like BYD have nearly caught up with Tesla in sales volumes, the profitability of the electric vehicle giant is declining, and Musk's political activism is beginning to alienate some consumers.
SpaceX, on the other hand, is showing a completely different dynamic. The company's only profitable division, Starlink satellite internet, is growing at an impressive pace. Wood first invested in SpaceX in late 2023, and it is now the largest position in ARK's venture portfolio, valued at approximately $1 billion. The IPO allows the fund to increase its investments in the public market.
It is worth noting that the purchase of $529.7 million worth of shares is a significant move even by ARK's standards. Meanwhile, SpaceX's cumulative loss as of March 31 stands at $41.3 billion. Retail investors have been allocated 30% of the offering, which is three to six times higher than the usual level, indicating strong demand.
Context of ARK's performance
Since the beginning of the year, the ARK Innovation ETF has grown by only 1.61%, while the S&P 500 has gained about 9%. Over the past 12 months, investors have withdrawn approximately $294 million net from the fund. According to Morningstar, from 2014 to 2024, ARK "destroyed" about $7 billion of its investors' funds.
In the IPO sector, Cathie Wood follows a single strategy: enter promising companies as early as possible. This is how ARK bought shares of Coinbase shortly after its listing in 2021 and recently bet on CoreWeave. Now, the biggest bet is on SpaceX.
My analysis: This move by Cathie Wood is not just a portfolio rebalancing but a signal of shifting priorities in the technology sector. Tesla is no longer the undisputed leader for ARK, making way for SpaceX with its monopoly position in the space industry. The only question is whether Starlink and other divisions of the company can ensure stable profits, or if this is yet another costly mistake for the fund. Time will tell.