Cathie Wood Sees 'Enormous' Arbitrage Opportunity

Ark Investment Management CEO Cathie Wood took to Twitter on Wednesday to highlight what she sees as an "enormous" arbitrage opportunity between the public and private markets.

What Happened? On Wednesday, Wood tweeted in response to news that spare-change investing and checking account app Acorns Grow Inc. is canceling its $2.2-billion SPAC merger and pursuing another round of private fundraising.

Related Link: Cathie Wood Explains Why Ark Investment Sends A Daily Email Disclosing Stock Moves

"The disconnect between valuations for innovative companies in the public vs. private markets is as wide as I ever have seen. The arbitrage opportunity is enormous," Wood said.

Why It's Important: Wood rose to superstardom as a stock picker in 2020 when Ark's ARK Innovation ETF ARKK widely outperformed the S&P 500.

Many of Wood's favorite innovative tech stocks were crushed in 2021, and the ARKK fund is down 44% overall in the past year.

Acorns CEO Noah Kerner said the company will be opting for a private capital raise at a higher pre-money valuation due in part to "market conditions." Wood's tweet suggests she believes the disconnect between private and public market valuations of tech stocks has never been wider.

ARKK's assets under management have now fallen from a peak of $28 billion in February 2021 to just $12.8 billion today, according to Bloomberg.

Benzinga's Take: After a brutal 2021, ARKK is off to an abysmal start to 2022, down 17.5% so far in the month of January. The public market conditions are so bad for tech stocks at the moment that Acorns and other companies are saying no thanks to the public market and opting to stay private until the environment improves. Until that time, ARKK's heavy concentrated portfolio of high-growth, high-valuation tech stocks may continue to be pressured, especially if the Federal Reserve raises interest rates more aggressively than anticipated.