Investing

Will Short Selling ARK ETFs Be the Next Big Thing?

In a federal filing earlier this month, Scion Asset Management and Michael Burry, famous for the “Big Short” on U.S. housing in 2007 and 2008, revealed an acquisition of 235,500 put options valued at $30.8 million in ARK Innovation ETF (NYSEARCA: ARKK) during the June quarter. It’s no secret that Cathie Wood’s signature fund is not having the same success this year that it had last year, so a well-known short seller getting into the game should have been no big surprise.

Scion and Burry also acquired 731,017 put options on Tesla Inc. (NASDAQ: TSLA) valued at about $1.1 billion. Tesla is the largest holding in ARKK with a weighting of 10.62% as of Thursday morning.

Last year at this time, the ARKK fund traded up about 77% for the year to date. For the same period this year, the shares are down by nearly 7%.

ARKK’s downturn also has spawned a potential short ETF. Tuttle Capital Management filed a prospectus with the U.S. Securities and Exchange Commission earlier this month for a proposed Short ARKK ETF. The fund’s objective is to provide “investment results that are the inverse of, before fees and expenses, to the daily price and yield performance of the ARK Innovation ETF (the “ETF”).”

Shorting ARKK and the other actively managed ARK Invest funds (ARKF, ARKG, ARKQ, ARKW, ARKX) and the two ARK Invest index ETFs (PRNT and IZRL) has been very active over the past 30 days, according to a new report from S3 Partners. As a percentage of an ARK fund’s total float, the short interest is below the U.S. average of 19.73%. The borrow fees on most of the funds, however, are higher than the U.S. average of 0.79%. S3 commented: “The scarcity of lendable shares is due to the lack of institutional holders and retail holdings primarily in fully-paid for accounts and not margin accounts which limits broker rehypothecation of internally held client assets.”

Here’s our chart of the S3 data. The third column is the percentage of shorted shares based on the fund’s total float, column four is the borrow fee, column five is the dollar value of the shorted shares and column six is the 30-day change in the value of shorted shares.

ARK ETF Short Interest Ticker SI % Float Fee Short Interest 30D Ch Shs Shorted
ARK Innovation ETF ARKK 13.40% 4.33% $2,882,087,995 $609,639,368
ARK Genomic Revolution ETF ARKG 7.11% 3.08% $579,824,156 $21,395,977
ARK Next Generation Internet ETF ARKW 4.31% 1.83% $241,853,710 $31,089,596
ARK Fintech Innovation ETF ARKF 4.95% 0.58% $176,314,602 $63,867,382
ARK Autonomous Technology & Robotics ETF ARKQ 1.39% 0.58% $36,857,052 $780,646
Israel Innovative Technology ETF IZRL 5.35% 3.58% $14,380,023 $69,003
ARK Space Exploration and Innovation ETF ARKX 1.77% 0.70% $10,478,518 $(2,482,456)
The 3D Printing ETF PRNT 1.13% 4.08% $5,698,956 $(129,867)