ARK Invest’s ARK Innovation exchange-traded fund sold another 62,415 Tesla shares worth about $16 million, the asset management firm founded by Cathie Wood revealed Friday night.
News of Friday’s stock sale comes after ARK Invest sold approximately 393,000 shares of Tesla (ticker: TSLA) worth nearly $100 million from its ETF Innovation Fund (ARKK) and two other funds. in Monday.
ARK did not respond to a request for comment on Monday’s sales, and the company did not immediately respond to a request for comment on Friday’s sales over the holiday weekend.
But Wood may be selling because of Tesla’s recent success: Shares have rallied nearly 50% in the past month, outpacing gains of 10% and 6%, respectively.
The rally in Tesla stock has also helped drive the Innovation ETF up about 15% over the past month.
It is uncertain whether Wood is taking profits or she believes Tesla stock is fully valued. by ARK published The target price for Tesla stock is $2,000 in 2027nearly eight times its closing price on Friday—corresponding to an average annual gain of about 66% between now and mid-2027.
The problem is most likely structural: Tesla stock makes up more than 11% of the Innovation ETF’s portfolio. Practically speaking, 10% seems to be ARK’s general rule: When things exceed a certain percentage in the portfolio, the company takes a cut. ARK may not be sold out yet, as Tesla’s share price performance has pushed it past 11% of innovation ETFs.
Although the Securities and Exchange Commission and the Internal Revenue Service have regulations on how large a position can be in a diversified investment vehicle, those regulations are unlikely to apply here.
Diversification reduces volatility and gives investors exposure to a wide range of stocks. However, ARK’s innovation ETF is relatively concentrated. The top 10 positions of the fund only hold 30 stocks, accounting for about 62% of the total portfolio.
Compare that to
(VTI) holds 3,883 shares. Its top 10 stocks, including two classes of stocks
(GOOGL), accounting for about 28% of total assets.
However, there can be limits to the concentration of any fund—meaning that excellent performance from a stock can create selling pressure on its position in the fund.
Write to Al Root at [email protected]