ARK Cutting Ties With E-Commerce Giant Sea

October 31, 2022

Cathie Wood’s ARK Investment Management sold the remaining shares of Sea Ltd. in its Ark Next Generation Internet ETF (ARKW) on Thursday, as the Southeast Asian e-commerce giant’s stock tumbles. 

Closing out the position comes after a steep drop in Singapore-based Sea’s stock—it hovered around $49 Friday, plummeting from the $353 commanded one year ago. Sea is becoming less profitable as it struggles with rising interest rates, volatile markets and competition from e-commerce rivals like Alibaba Group Holding.  

ARK had purchased nearly 2 million Sea shares, according to data from its website, starting in early December 2020 when the price was around $200 a share. It last bought Sea on March 25, when the stock closed at $116.12. 

The divestment comes as ARK struggles on other fronts. The firm announced the closure of its Transparency ETF (CTRU) at the end of July, and its eight remaining ETFs, including the ARK Innovation ETF (ARKK), have underperformed broader markets this year. Its ARK Innovation ETF (ARKK), which soared last year, has plummeted 60% so far in 2022, steeper than the 19% decline in the S&P-500-tracking exchange-traded fund, the SPDR S&P 500 ETF Trust (SPY).  

In an effort to preserve cash, Sea has cut staff and restricted expense budgets. According to an internal memo sent by CEO Forrest Li in September and obtained by Bloomberg, the company’s leadership team will forgo salary “until the company reaches self-sufficiency.” 

The 1,000-word memo also said the company would cap business travel to economy class flight fares and limit a variety of other travel expenses, Bloomberg reported.

ARK has been getting rid of Sea shares linked to its ETFs as early as May, selling about 39% of its holdings in Sea within that month alone. The Ark Innovation ETF (ARKK) cut ties with the company shortly afterward, in June, now followed by ARKW’s exit.  

The Ark Fintech Innovation ETF (ARKF) is now the only ARK fund holding shares in Sea; it comprises 0.35% of its holdings, worth more than $2.8 million, according to ARK’s website. 

Ark declined to comment about the decision to sell Sea shares. 

 

Contact Zoya Mirza at [email protected] 

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