ARK Invest Continues Piling into DraftKings, Skillz

Posted on: March 2, 2021, 10:27h. 

Last updated on: March 2, 2021, 01:24h.

Todd Shriber @etfgodfather Read More

Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Cathie Wood’s ARK Investment Management continues adding to positions in DraftKings (NASDAQ:DKNG) and Skillz (NYSE:SKLZ).

The New York-based asset manager, known for establishing stakes in disruptive, emerging growth companies, purchased 173,800 shares of DraftKings stock on Monday as the name surged to an all-time high after eight sell-side analysts lifted price targets.

Yesterday’s DraftKings purchase came after ARK added nearly 106,000 shares of mobile games and esports tournament provider Skillz on Friday, Feb. 26, and another sizable buy in the newly public company on the prior day.

Following a merger with a special purpose acquisition company (SPAC), Skillz became a standalone publicly traded entity last December. ARK was one of the first managers of active exchange-traded funds (ETFs) to embrace the stock. The money manager started buying DraftKings stock a month ago.

ARK Changing Things Up with DraftKings Stock

Previously, ARK was allocated to the daily fantasy sports (DFS) company and Skillz in the ARK Next Generation ETF (NYSEARCA:ARKW).

That changed yesterday when the fund issuer directed the new DraftKings purchase to the ARK Fintech Innovation ETF (NYSEARCA:ARKF).

“The adviser defines ‘Fintech innovation’ as the introduction of a technologically enabled new product or service that potentially changes the way the financial sector works,” according to the issuer.

Entering today, ARK held 546,288 shares of DraftKings in ARKF, good for 0.81 percent of the fund’s weight. That makes the sportsbook operator the number 40 holding of 48 in the ETF.

As of March 1, DraftKings and Skillz combine for 1.92 percent of ARK Next Generation ETF, with the DFS company ascending to the 31st spot among 53 equity holdings. ARKW’s total allocation to those two stocks is just over 3.2 million shares

Not Too Big, At Least Not Yet

Because of the stock-picking acumen of Wood and her team, ARK funds are taking in billions of dollars of new capital. That cash must be deployed into existing or new positions, and some market observers are growing concerned that some ARK funds own too much of some smaller companies’ equity.

As of Feb. 22, 2021, the ARK Innovation ETF (NYSEARCA:ARKK) owned at least five percent of a company’s public shares in more than one third its holdings, and at least 10 percent of free float in 10 out of the 55 companies in its portfolio,” according to Morningstar.

For now, that’s not a risk for the fund manager as it pertains to DraftKings and Skillz, as it’s not a top 20 holder of either name.

To control 10 percent of the Skillz float, ARK would need to own roughly 40 million shares — the same level needed to get to a comparable ownership level in DraftKings. Just five institutional investors own three percent or more of the sportsbook betting firm’s shares outstanding, and none exceed six percent.