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Why Cathie Wood Didn’t Participate in Arm’s IPO: Overvaluation and Competitive Dynamics

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Ziad Najjar
Ziad Najjar is an Egyptian author who studied business and finance in the United States and has a keen interest in media. He combines his expertise in these fields to create informative and engaging works accessible to a broad audience.

ARK Invest CEO Cathie Wood Avoided Participating in Arm’s IPO, Citing Overvaluation

ARK Invest CEO Cathie Wood recently revealed that her company did not participate in Arm’s IPO due to concerns about overvaluation. Wood believes that Arm, a British chip designer, was overvalued compared to its competitive position in the market.

Arm, which is controlled by Japanese investment giant SoftBank, went public on Nasdaq last week at an IPO price of $51 per share, resulting in a valuation of nearly $60 billion. Although the stock initially surged by 25% on its first day of trading, it has since experienced daily declines and closed at $55.17 on Tuesday.

During an interview on ‘s “Squawk Box Europe,” Wood expressed her belief that the recent hype surrounding AI-focused companies is warranted. She emphasized the undervaluation of innovation, particularly in relation to the vast opportunities presented by artificial intelligence. However, Wood expressed caution regarding Arm, suggesting that there may be an excessive focus on AI without sufficient consideration of the competitive landscape.

Wood further explained her decision to forgo participation in Arm’s IPO, stating that the company’s valuation appeared high when compared to other stocks in ARK Invest’s portfolios. She highlighted the presence of lower-priced stocks with greater exposure to AI within their portfolios.

Arm declined to comment on Wood’s remarks.

ARK Innovation ETF, Wood’s flagship fund, includes notable holdings such as Tesla, Shopify, UiPath, Unity, Zoom, Twilio, Coinbase, Roku, Block, and DraftKings. The fund experienced a resurgence this year after being negatively impacted by aggressive interest rate hikes from the Federal Reserve. Wood believes that the anticipation of interest rates peaking will continue to drive interest in stocks with AI exposure.

Wood also discussed the favorable environment for innovation and global megatrend strategies, citing decreasing inflation in major economies and the expected unwinding of aggressive monetary policies by central banks. She expressed optimism about the future of technology, particularly with the collapse in the cost of AI, making it easier to build and scale tech companies worldwide. Wood emphasized the company’s openness to technologies flourishing in Europe and announced ARK Invest’s entrance into the European passive investment market through the acquisition of British thematic ETF issuer Rize ETF.

Despite Europe accounting for around 25% of ARK Invest’s research demand since its establishment in 2014, European investors have not had access to invest in the company’s U.S.-based ETFs until now. Wood believes that the cost of technology, especially AI, has significantly decreased, enabling the growth of tech companies globally.

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