When it rains, it pours, as the old adage goes, and this appears to be the case for Coinbase. The publicly traded cryptocurrency exchange has gone through a cascade of bad news and poor press over the past few months.
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Throughout it all, the CEO and CIO of ARC Invest, Cathie Wood hasn’t wavered on her stance on Coinbase. Cathie Wood and Coinbase CEO Brian Armstrong even took the stage together at the Milken Institute’s 2022 global conference as part of a panel discussion titled “Conversations with Crypto Pioneers with Kathy Singing Coinbase’s Praise.” The praises weren’t all talk either, as she backed it up with action as Coinbase cracked Arc Invest’s top 10 holdings, with Arc recently buying up $3 million worth of Coinbase stock in May of 2022. Fast forward just two months and Cathie Wood has had a change of heart on Coinbase.
According to Bloomberg, three ARC Investment Management LLC funds sold slightly over 1.41 million shares, which were worth about 75 million dollars as of Tuesday’s close.
According to Arc’s daily trading data, the firm’s flagship Arc innovation ETF sold 1.13 million shares. The sell-off came on the heels of Coinbase facing a SEC probe that could not only devastate Coinbase as a company but also change the cryptocurrency landscape at large. Coinbase first caught headlines regarding the SEC when a case that is considered the first of its kind made headlines when ex-coin-based product manager Ishan Wahi was charged along with two other individuals with wire fraud in connection with an alleged insider trading scheme involving cryptocurrencies.
As an aside, although Coinbase was not explicitly part of that case, the SEC is now probing Coinbase, alleging that nine of the coins on the exchange are securities. This run-in with the SEC appears to have crossed the line, according to Cathie Wood, who has been consistently buying up Coinbase stock since its debut on the New York Stock Exchange in 2021. This is the first time Arc Invest Fund has decided to dump the exchange.
When Cathie purchased $3 million worth of stock back in May of 2022, many pundits and analysts questioned if Cathie was buying the dip or catching a falling knife as Coinbase’s stock had fallen dramatically, starting off the year at around $250 per share to trading at around $54, having lost about 79% of its value. It appears that Cathie has started to believe that she’s catching the falling knife.
The dumping Coinbase isn’t the only first for Cathie Wood and Arc Invest this week. Earlier, it was reported that Cathie was closing down one of her exchange-traded funds. This is the first time her Arc invest management has pulled the plug on an ETF. The Arc transparency ETF, which launched at the end of last year, possessed holdings like Teledoc Helth incorporated and Spotify Technology SA. As the name suggests, the fund aimed to invest in companies that received high scores on transparency.
Cathie Wood’s’ closing a fund and then dumping Coinbase doesn’t bode well for Coinbase. Arc Invest was the third biggest shareholder of the company, holding about 8.95 million shares as of June’s end, according to Bloomberg compiled data.
At the time of writing, Coinbase is trading at $58.83, which is up 11% on the day but a far cry from its high of $342 in November. Cathie Wood’s Arc invest fund is in the same boat, currently trading at $46.38, which is up 6% for the day but down drastically year to date, showing 52.18% in losses.
According to Bloomberg data, Arc sold Coinbase at an all-time low of $53 per share after purchasing the stock at an average price of nearly $255. This is a blow not only to Arc’s lineup of beleaguered actively managed funds but also to the conviction of companies that Cathie would predict to be disruptive. While it is well known that Cathie Wood is a strong supporter of cryptocurrency blockchain and has invested in Block Jack Dorsey’s company, it will be interesting to see what moves she makes with Coinbase in the future.
What do you think of Cathie’s moves? Was it a good move to sell Coinbase?
[This article is a transcription of a video made by Only The SAVVY]
[Original video: https://youtu.be/vpfiNbG-u5E]