U.S. hedge fund Greenlight Capital earned 37% of its money in 2022 short stocks held by Cathie Wood‘s Ark Innovation ETF, the founder hints in a letter to the investor’s rice field.
The ARK fund hasn’t been named, but David Einhorn believes that in early 2021, Greenlight will be “a so-called ‘innovation’ stock with very similar characteristics to our bubble name.” ETFs that are actively managed”.
Einhorn points to Greenlight shorting a basket of his ETF’s constituents, saying he’s lost 76% of its value since first investing in 2021.
Commentators have suggested the ARK ETF most resembles a greenlight short, noting that it plummeted 68% in 2022 as more technology-focused investments headed south.
Wood is a strongly opinionated fund manager, and both fans and detractors seem to either support or criticize his aggressive all-in investing style.
ARK’s most famous holding is Tesla, which has lost 62% of its value over the past year, while other big holdings such as Coinbase (down 75%) and Shopify have similarly fallen 62%.
Einhorn revealed that Greenlight first messed around with “bubble baskets” in 2014 and backfired again in 2020, but got lucky a third time in 2021.
“We are just stubborn. In March 2021 we believed the bubble had burst again… this time.”
Einhorn added that Greenlight’s third bubble has 31 stocks in his basket and no big losers in the portfolio so far.
“2022 has been a very good year,” he said Einhorn. Greenlight’s definition of a bubble stock can underperform traditional valuation analysis by at least 80 degrees and still doesn’t look cheap.
