ARK Invest Short Sellers Have $2.3B In Profits So Far In 2022

Zinger Key Points
  • Recently, ARK funds has been among the market's worst performers.
  • The ARKK and ARKG funds are ARK short sellers' two favorite targets.

After a horrible 2021 for Cathie Wood, the ARK Innovation ETF ARKK is down another 59.1% in 2022.

High-growth tech stocks have taken a beating as interest rates have spiked, sending ARK Invest ETFs plummeting.

See Also: If You Invested $1,000 In The ARK Innovation ETF One Year Ago, Here's How Much You'd Have Now

The Numbers: The ARK Invest family of ETFs currently has a total short interest of $1.86 billion. S3 Partners analyst Ihor Dusaniwsky said this week that some short sellers are taking profits in the ARK funds, but new short sellers are also piling in.

"Even though total short interest in the ARK family of ETFs declined from $1.92 billion on 8/16 to $1.86 billion on 9/27 there was $405 million of new short selling that almost totally offset the $463 million of mark-to-market declines in the value of shares shorted," Dunsaiwsky said.

As a result, roughly 16.8% of the ARK Invest ETF family's float is currently held in short positions, up from just 12.9% in mid-August.

Short sellers have not been deterred by rising borrow costs, which have increased from 2.6% to 4.9% on average for the ARK funds in the past six weeks, Dusaniwsky explained.

See Also: Cathie Wood Says Credit Default Swap Market Is Extremely Bearish As ARKK Fund Drops Another 8%

Shorting everything ARK Invest has to offer has been a very profitable trade in 2022, Dusaniwsky said. ARK short sellers have generated $2.4 billion in mark-to-market profits year-to-date.

ARK's Biggest Losers: Not surprisingly, the ARK Innovation ETF has been the most popular target for short sellers in 2022. Not only does it have the highest short interest of any ARK fund at $1.4 billion, it also has the highest short percent of float at 19%. Here's a look at the five ARK funds with the highest short interest along with their year-to-date performance:

  • ARKK: $1.4 billion in short interest, down 59.1% year-to-date.
  • ARK Genomic Revolution ETF ARKG: $273.3 million in short interest, down 44.9% year-to-date.
  • ARK Next Generation Internet ETF ARKW: $78.6 million in short interest, down 60.8% year-to-date.
  • Ark Fintech Innovation ETF ARKF: $63.1 million in short interest, down 61.6% year-to-date.
  • ARK Autonomous Technology & Robotics ETF ARKQ: $10.1 million in short interest, down 40.4% year-to-date.

Wood rose to popularity when her bets on high-risk speculative investments generated some staggering short-term returns during the market's recovery from the COVID-19 sell-off in 2020. However, investors have dumped speculative assets in the past 12 months, and the ARK funds has been among the market's worst performers due to Wood's extremely aggressive growth investing strategy.

See Also: Cathie Wood Hands Over Management Of A Pair Of Ark Funds

In fact, Ark's flagship ARKK fund has now significantly underperformed the broad market in the long-term. The ARKK fund is now down 9.4% overall in the past three years, compared to a 22.7% gain for the SPDR S&P 500 ETF Trust SPY in that same stretch.

Benzinga’s Take: Wood is sticking to her bullish stance on struggling tech stocks and Bitcoin BTC/USD, though it's difficult to have any confidence in her projections at this point given her abysmal performance. Traders who want an easy way to bet against Wood and the ARKK ETF can simply buy the ARKK inverse ETF, the AXS Short Innovation Daily ETF SARK, which is up 67.3% so far in 2022.

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Posted In: Analyst ColorShort IdeasSpecialty ETFsAnalyst RatingsTrading IdeasETFsCathie WoodIhor DusaniwskyS3 Partners
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