ARK investment writes down Twitter stake by 47%

Cathie Wood's ARK investment management has written down its stake by 47 per cent in Twitter since the takeover of Elon Musk as the owner last year.

What did ARK Investment say?

ARK Investment Management, founded by Cathie Wood, is an American investment management firm based in St. Petersburg, Florida, that manages several actively managed exchange-traded funds. 

“We take fair valuation very seriously and have had to write that [Twitter] down. The write-down is not representative of our fundamental outlook and belief in the long-term return on investment we believe that it will have for our shareholders.” Cathie Wood said.

However, she reveals being bullish on Twitter's long-term outlook and said that her fund updates the internal valuation of private companies regularly.

“I would love to get more stock at these price levels actually, but no one wants to let any go. So that tells you something,” she added.

Twitter's rising tensions after Musk's Takeover

ARK Investment at present owns a small stake in Twitter using a venture fund that is open to the public and includes public market and private investments. At present, Twitter faces a heavy debt load and a steep drop in advertising. Musk tweeted last week that the advertising revenue had come down by almost 50 per cent with a negative cash flow in the company.

ARK Investments is bullish on the future aspects of Twitter | Image credit: Pexels

During the initial days of the acquisition, Musk revealed that his Twitter purchase will help create an everything app that can offer information and entertainment with a main focus on reaching over a billion users in the next 10 years.

"We think they can coexist. Threads has lit the competitive fire or taken it up a notch and they will be good for Twitter. We also think that, in the longer term, Elon and his team are very serious that they’re going to turn this into an everything app,” Cathie also adds on the competition that affected Twitter.

After laying off thousands of employees and actively cutting costs for operations, the company reduced its non-debt expenditures to $1.5 billion from a projected $4.5 billion in 2023, Reuters reported. The company also faces an annual interest payment of about $1.5 billion as a result of a loan it took in the $44 billion deal for acquisition.

Twitter's competition and uncertain decisions

In addition to the uncertain decisions Musk took in recent weeks, the competition from rivals like Threads, Mastodon and TruthSocial has added to the problems with the smooth functioning of the platform. Although Musk has alleged and filed lawsuits on account of poaching employees and copying ideas, Threads has attained its share level of popularity in recent weeks.

Musk's actions have also been criticised for the content moderation that followed the exodus of many advertisers. The appointment of Linda Yaccarino as the CEO of the company also signals an approach that the company wishes to keep ad sales as a priority. This is also at a time when it continues progressively with the subscription revenue model.

In addition to Cathie's ARK, other asset managers like Fidelity Investments have also written down Twitter Investments in April.