Why Cathie Wood's Ark Has Substantially Reduced Its Twitter Stake

Why Cathie Wood's Ark Has Substantially Reduced Its Twitter Stake

Ark Invest, the fund run by Cathie Wood, has been gradually trimming its position in Twitter, Inc. TWTR since the start of the year. The fund manager on Tuesday provided insights into the logic behind the Twitter liquidations and what it would take for the social media platform to reinvigorate growth.

What Happened: Ark Invest has been scaling back its Twitter holdings ever since co-founder Jack Dorsey gave up the role of CEO, Wood said in an interview with CNBC.

Dorsey announced late last year that he is stepping down, reasoning that the company is ready to move on from its founders. India-born Parag Agrawal was named as his replacement.

As recently as Monday, when Agrawal announced that Tesla, Inc. TSLA CEO Elon Musk has decided not to join the Twitter board, Ark funds sold more shares of the social media app.

Musk sprang a surprise last week by disclosing a passive stake in Twitter. Agrawal soon made an announcement that Musk was joining the country's board — only to state a day later that the Tesla CEO had declined.

Related Link: Does Elon Musk's About-Face On Twitter Portend 'Game Of Thrones' Battle Ahead?

Following the liquidations, Wood's ARK Next Generation Internet ETF ARKW and ARK Fintech Innovation ETF ARKF now hold about 831,683 and 299.437 shares, respectively, valued at $36.99 million and $13.32 million, in Twitter. The stock accounts for about 1.73% and 0.98%, respectively, of these funds.

"We know there is now going to be a lot of management distraction, maybe board distraction, with or without Elon," Wood told CNBC.

Twitter Business Model May Not Work: Wood also sounded out her view that Twitter may not succeed with its current model.

"Maybe the model isn't right around advertising, maybe it is subscription," the Ark Invest founder was quoted as having told CNBC. She suggested it could be a combination of both.

When asked what Musk might do with his Twitter stake, Wood reportedly said the Tesla CEO may push for doing away with censorship.

Twitter closed Tuesday's session 5.38% at $44.48. The stock had rallied to a high of $54.57 in April 5, a day after Musk disclosed his stake, before giving back some of the gains.

Related Link: As Elon Musk Joins Twitter Board, Analyst Sees 'Strategic Initiatives' Ahead; This Is 'Just Start of Musk's Involvement'

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