Tech had a very difficult and turbulent 2022, suffering as the covid-19 economy bid farewell.
The fourth quarter almost turned into a selloff for tech stocks as investors questioned the health of the economy. In particular, they feared a so-called hard landing in the economy -- a recession -- as the Federal Reserve continued to aggressively raise interest rates to fight surging inflation.
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Most investors who have invested in tech stocks have seen their portfolio values melt away. This was particularly the case of the famed money manager Cathie Wood, chief executive of Ark Investment Management. Her flagship Ark Innovation ETF (ARKK) was hit hard, losing nearly 63% of its value last year.
Wood describes Ark Innovation ETF as an "actively managed exchange-traded fund that seeks long-term growth of capital by investing under normal circumstances primarily (at least 65% of its assets) in domestic and foreign equity securities of companies that are relevant to the fund’s investment theme of disruptive innovation."
Soros Acquired Call Options on Ark Innovation ETF
By disruption, she means she buys stocks of companies that "rely on or benefit from the development of new products or services, technological improvements and advancements in scientific research."
This focus on disruptive tech companies explains the fall of the Ark Innovation ETF shares last year after good performances during the two covid years. The rout gave a good case to Wood's critics.
But the financier can count on the support of the legendary investor George Soros. Indeed, the financier acquired call options on Ark Innovation ETF in the fourth quarter according to recent regulatory filings.
These call options -- bets that a stock price will rise -- relate to 500,000 shares whose value was $15.62 million at the time of the contract between Soros Fund Management and the seller.
Calls give SFM the right to buy these 500,000 Ark Innovation ETF shares at a specific price at a given time. If Soros exercised his right and acquired the shares, he has already done a great deal as Ark Innovation ETF stock this year has rebounded strongly, by around 31%. At the closing price of ARK Innovation ETF stock on Feb. 14, the shares are valued at $20.4 million.
Having the support of Soros reinforces Wood in her strategy because the billionaire is better known for his bets against than his bets for.
How George Soros Became a Legend
Soros became a financial legend after a masterstroke in 1992. On Sept. 16, 1992, the pound sterling collapsed, forcing Great Britain to withdraw from the European Exchange Rate Mechanism. It was called Black Wednesday, also known as the 1992 Sterling crisis.
Soros, at the time a currency trader, had bet against the British pound by shorting 10 billion pounds. He based the bet on the idea that the British government's attempts to support the pound would fail. He launched a public campaign against the pound. And he was proved correct. As a result, Soros is known for "breaking the Bank of England."
Stock-market regulations require managers of funds with more than $100 million in U.S. equities to file a document, a 13F, within 45 days of the end of the quarter, to list their holdings in stocks that trade on U.S. exchanges.
The value of Soros's U.S. equity portfolio rose 24% quarter-over-quarter to $7.26 billion. Soros Fund Management is a family office that manages public and private equity.
"SFM invests globally in a wide range of strategies and asset classes, including public equities, fixed income, commodities, foreign exchange, alternative assets and private equity," the firm says on its website.
Soros, whose net worth is estimated at $8.5 billion as of Feb. 14, according to the Bloomberg Billionaires Index, is well known for pouring money into philanthropic efforts. Most of his firm's assets belong to Open Society Foundations, which supports "people across the world who work for justice, equity and free expression."
