Michael Burry of ‘the Big Short’ bets against Cathie Wood of ARK

Text size

Michael Burry, the brave hedge fund manager whose life was told in Oscar-winning biopic “The Big Short,” is targeting stock picker Cathie Wood.

In a brief released Monday, Burry revealed that his company, Scion Asset Management, held bearish put options against 235,500 actively managed Woods shares.

ARK Innovation Exchange Traded Fund

(ticker: ARKK) at the end of the second quarter. The new position was valued at nearly $ 31 million, according to the quarterly filing, which is required for hedge funds above a certain size.

A sales contract gives Scion the right to sell shares of the ETF at a price agreed upon before a certain date. If ARK Innovation’s shares fall below the threshold before the options expire, the hedge fund may sell the shares at a profit.

Burry is not the only investor betting that the price of ARK innovation will drop. The volume of put options traded on the ETF is on the rise, while short interest on the ETF recently hit an all-time high. There’s even a Short ARKK ETF on file which, if approved by the Securities and Exchange Commission, would allow retail investors – those who can’t short sell or trade options directly – to place bearish bets. against Woods.

Wood’s firm, ARK Invest, absorbed billions of new assets last year thanks to the spectacular performance of some of its active, innovation-driven, high-growth equity ETFs. Several of them were among the best performing funds of 2020, with returns above 100%.

But funds have struggled to maintain that momentum this year. Many of their stocks are trading at high valuations which bet on huge expected growth going forward. However, as inflation rises and interest rates rise, the present value of future cash flows of growing companies decreases. The ARK Innovation ETF is now down 6% for the year, with asset outflows of $ 500 million in the last month.

Burry has been warning against unsustainable valuations of some ARK holdings for months. It already has big bearish positions against the electric car maker

You’re here

(TSLA), one of the main investments in ARK ETFs. Monday’s filing shows Burry increased his bearish stakes on Tesla to nearly 1.1 million shares, from 800,100 shares in the first quarter. These bets are worth $ 731 million.

Tesla shares are down 2.8% year-to-date, while ARK Innovation has lost 6% in value. Still, both are trading at much higher levels compared to early 2020, up 675% and 134%, respectively.

Burry rose to fame for successfully betting against the housing bubble, which ultimately sparked the financial crisis in 2008. His story is just one of many stories told by Michael Lewis in his book “The Big Short” and later. turned into a film.

The financier was also one of the first major investors to bet on

GameStop

in 2020, which sparked a shopping spree in the video game retailer’s inventory earlier this year. But Burry sold his entire stake before GameStop became a memes stock on Reddit, missing the 2,000% rise.

Write to Evie Liu at [email protected]