Written by: Li Xiaoyin, Wall Street Insight
Cathie Wood sold Circle, cashing out over $300 million.
According to media reports on Wednesday, ARK Investment Management, led by the famous investor Cathie Wood, sold approximately 1.5 million shares of Circle stock worth around $333 million over the past four trading days.
Analysts generally believe this is a normal profit-taking operation by ARK Investment.
Wall Street Insight previously mentioned that ARK has long been known for its firm bet on cryptocurrency and disruptive technologies. As one of the most active institutional supporters of Bitcoin, Wood predicted earlier this year that Bitcoin's price could reach $1.5 million by 2030.
As the issuer of the second-largest stablecoin USDC, Circle's stock price has soared from its initial offering price of $31 to a high of $263.45 since its listing on June 5, an increase of nearly 750%, with the company's market value reaching $50 billion, joining heavyweight players like Coinbase and Robinhood.
On the first day of Circle's listing, ARK Investment purchased 4.5 million shares, with a holding value of approximately $373 million. With Circle's significant stock price increase, ARK Investment has likely recovered most of its initial investment cost through this sale.
On Tuesday, Circle's stock price fell 8.1%, temporarily interrupting its upward trend.
ARK Investment Reduces Holdings After Significant Profits
According to media calculations, ARK Investment's three ETFs collectively sold approximately 1.5 million shares of Circle stock.
Among them, the flagship product ARK Innovation ETF (ARKK) sold 1.2 million shares, with assets under management reaching $6.5 billion. ARK Next Generation Internet ETF (ARKW) and ARK Fintech Innovation ETF (ARKF) also followed suit in reducing holdings.
However, ARK is currently still the eighth-largest shareholder of Circle.
Bloomberg Intelligence ETF Analyst Athanasios Psarofagis stated:
"ARK has doubled its investment in less than a month, and it's not uncommon for them to sell when the stock price rises."
Todd Sohn, Senior ETF Analyst at Strategas Research, pointed out:
"Profit-taking is a natural part of ARK's strategy. The more important question is whether a complete liquidation would pose a risk similar to the Nvidia scenario."
In 2023, Wood had completely sold out of Nvidia stock when its price soared, which drew market attention.
Stablecoin Payment Prospects Questioned, High Valuation Raises Concerns
Circle's stock price has continued to rise since its listing, closing at a historical high of $263.45 on Monday. This has made Circle the most notable cryptocurrency-related company listing since Coinbase's direct listing in 2021.
However, analysts have differing views on Circle's continued growth potential. Jefferies analyst Trevor Williams stated in a report on Monday:
"We are highly skeptical about whether stablecoins can become a payment method in the United States. The current card-based payment system is convenient, safe, and offers rich rewards, while stablecoins may lead to a poor consumer experience and lack new discount or reward mechanisms."
He added that stablecoins' appeal to US consumers might be limited to serving as an entry and exit channel for crypto trading.
Michael Lebowitz, portfolio manager at RIA Advisors, also stated that stablecoins are more like providing a money market fund-like service for crypto buyers and sellers, rather than true alternatives to Visa or Mastercard.
He believes the impact of stablecoins on traditional payment giants may be overestimated.
Meanwhile, Circle's significant stock price increase has also pushed up its valuation, with a price-to-earnings ratio close to 180 times, far higher than the S&P 500 index's forward P/E ratio of about 22 times.
Miguel Armaza, founding partner of Gilgamesh Ventures, believes that Circle's high P/E ratio can only be sustained if the company significantly improves its net profit margin and profitability:
"Any execution challenges, unexpected regulatory setbacks, or macroeconomic headwinds could easily compress the company's valuation multiple, bringing Circle's valuation closer to peer levels."
Additionally, data shows that Circle's free float is only 25%, compared to the average of 95% for S&P 500 index components. Low liquidity means the stock price is prone to significant volatility, and a reversal in market sentiment could put downward pressure on the stock price.
