In the Blue Corner: Cathie Wood
Who is Cathie Wood?
Cathie Wood is the founder and CEO of Ark Invest. One of the most popular investment management firms that focus on growth sectors and long-term, high-reward investments.
Wood is the former Chief Investment Officer at AllianceBernstein, but left the company in 2014 to start Ark Invest after her popular disruptive innovation funds were deemed to be too risky.
Why has she become so famous?
In 2021, Forbes named her in the “50 over 50” list of influential figures over the age of 50. She was named the Best Stock Picker of the Year by Bloomberg News in 2020.
Wood has gained a massive following in social media communities such as FinTwit and Reddit. Her focus on popular growth names is held by many as the industry standard of how growth sectors are performing.
Wood has made several forward-looking forecasts that have gained both the ire and praise of Wall Street. In 2018, she famously predicted Tesla (TSLA) would hit $4,000.00 per share. She was ridiculed at the time, but in January of 2021, Tesla shares hit that mark on a split-adjusted basis.
Wood has also predicted that the digital currency Bitcoin will one day hit a price of $500,000.00. She definitely puts her money where her mouth is by adding both Grayscale Bitcoin Trust (GBTC) and Coinbase (COIN) shares to her various ETFs.
Cathie Wood Ark Invest Holdings:
In the Red Corner: Hindenburg Research
Who is Hindenburg Research?
Hindenburg Research is a well-known investment research firm that focuses on short-selling stocks by releasing reports alleging things like fraud or providing information that misleads investors. (https://hindenburgresearch.com/)
Hindenburg was founded by Nathan Anderson. An activist short-seller that has made a living off of taking down publicly traded companies.
Why are they so famous?
Hindenburg Research has been one of the more accurate short-selling investment research firms over the past few years and have revealed fraudulent activities by several different companies.
First, it exposed electric truck maker Nikola Motors (NKLA) in a damning report that revealed CEO Trevor Milton was behind operating Nikola as an ‘intricate fraud’.
The timing of the report couldn’t have been better: It was on September 10, 2020. Just days after Nikola announced it was entering into an agreement with auto industry heavyweight General Motors (GM).
Milton was ousted as CEO and never did deliver his long awaited rebuttal to Hindenburg. Shares of Nikola have plummeted from unimaginable highs of $93.99 in June of 2020, to its current price of just over $15.00 per share. Nikola is now the poster child of skepticism surrounding companies that come public via SPAC IPOs.
Hindenburg took on another EV SPAC company in Lordstown Motors (RIDE), releasing a scathing report on March 12 of this year.
Just last week, Lordstown saw both its CEO and CFO resign. As well as the company reporting that there is significant doubt it will be able to meet previous production estimates.
Hindenburg has taken on other heavyweights and is well known for taking a short position and driving stock prices lower.
The Heavyweight Fight: Cathie Wood vs. Hindenburg Research
Round 1: Hindenburg Throws The First Punch
On June 15th, Hindenburg struck again, this time targeting popular sports gambling and fantasy sports company DraftKings (DKNG).
Some well-known investors in DraftKings include Walt Disney (DIS), WWE (WWE) owner Vince McMahon, and owner of the New England Patriots, Robert Kraft. DraftKings also has lucrative partnerships with the NFL, MLB, NHL, NASCAR, UFC, and the Dish Network.
A lot of potential brands could be hurt by these allegations if proven true.
In the report, Hindenburg alleges that DraftKings’ SPAC merger partner, a Bulgarian company called SBTech, is heavily involved in black market and illicit gambling that has ties to money laundering and organized crime.
SBTech was absorbed into DraftKings as a part of the SPAC merger. It now operates as an in-house part of the DraftKings brand. Therefore, allegations against SBTech are allegations against DraftKings as well.
According to Hindenburg, SBTech attempted to distance itself from the black market and organized crime prior to the merger with DraftKings. It even created a new entity called BTi, that acted as a front for SBTech so it could continue to make revenues from markets where gambling was illegal.
Hindenburg gives an estimate that 50% of SBTech’s revenues are made in markets where gambling is considered illegal. In fact, Hindenburg actually gives several gambling websites that have ties to known organized crime rings, that led back to SBTech and its subsidiaries.
These allegations are some of the most serious that Hindenburg has reported, with legitimate legal consequences that could have a long-term effect on the DraftKings brand.
Shares of DraftKings fell by 4.2% following the news.
Does Hindenburg Research have a short position on DKNG? At what price?
Oh you better believe Hindenburg has a short position in DKNG. So as with most short-seller reports, take them with a grain of salt.
While Hindenburg does not reveal how large of a short position they own, fundamentally it is in their best interest for the DKNG stock to continue to fall.
Round 2: Cathie Wood Attacks
Enter Cathie Wood, who may just be the personification of buying the dip!
Wood is well known to target companies she likes long-term that are beaten down. Some examples of this include her continued support of Coinbase (COIN) and Teladoc (TDOC) during their prolonged dips.
So how much DraftKings did Wood buy? She added $42 million worth or 870,299 shares following Hindenburg’s report. Wood added these shares to both her Ark Next Generation Internet ETF (ARKW) and her Ark Innovation ETF (ARKK). The stock now represents the 19th and 17th largest holdings in each ETF respectively.
It seems like the markets were supportive of Wood’s investment as shares of DraftKings closed the next day higher by 0.6%, outpacing the broader markets.
There Can Be Only One!
… Who will win?
Judging from DraftKings’ rise the next day, it looks as though Wood and Ark Invest have taken round one from Hindenburg.
The report from Hindenburg was thorough and detailed, but unfortunately for them, there is a general disdain right now for short sellers in this market.
Retail investors have made it their mission to blow up short positions across the market, so we just don’t think Hindenburg’s latest report will hold up against the Queen of Growth, the Duchess of Buying that Dip, Cathie Wood.
What do YOU think?
Who will win this fight?
Leave a comment below.