- Ark Invest has marked down its Twitter valuation by 47% since it was taken over by Elon Musk, the Wall Street Journal reported.
- Musk had recently tweeted that Twitter's advertising revenue has been cut in half since he took over the company.
- Despite the steep writedown, Ark CEO Cathie Wood said she is still bullish on the company.
Ark Invest has marked down its valuation of Twitter by 47% since Elon Musk took over the company, but CEO Cathie Wood is still bullish on the company.
That's according to a Monday report from The Wall Street Journal. Given Musk purchased Twitter for $44 billion late last year, the markdown would put the company's current valuation at about $23 billion, based on Ark's estimate.
"We take fair valuation very seriously and absolutely 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," Wood said in a recent interview.
Ark Invest's Venture fund, which is open to all investors in the form of a mutual fund that offers limited liquidity via quarterly redemptions, owns a small stake in Twitter worth about 2.4% of the fund as of June 30.
Wood said she would like to buy more Twitter stock, but that's difficult to do because nobody wants to sell it.
"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," Wood said.
The steep valuation drop, according to Ark Invest's estimates, is of little surprise considering that Musk himself tweeted on Saturday that the social media company has seen its advertising revenue decline by 50% since he took over late last year.
"We're still negative cash flow, due to ~50% drop in advertising revenue plus heavy debt load," Musk said of Twitter on Twitter.
On top of that, Twitter has had to grapple with the launch of Threads by Meta Platforms, which is essentially a Twitter clone and represents its most serious competition after the platform swelled to more than 100 million accounts within a week of its launch.
But Wood isn't too concerned about Threads and its potential impact on the long-term success of Twitter.
"We think they can coexist. I think Threads has lit the competitive fire or taken it up a notch and it will be good for Twitter. We also think that longer term, Elon and team are very serious that they're going to turn this into an everything app," Wood said.
An everything app alludes to the idea of similar apps that have been successful in emerging market, in which one app handles everything from social media to payments to ride hailing. But for now, that vision seems far off as Musk has recently implemented a rate view limit of tweets in a bid to clamp down on bots.
Ark isn't the only investment firm to write down its stake in Twitter. Fidelity had reduced its estimated valuation on the company multiple times since Musk purchased it, most recently to just $15 billion in May.
Wood's views, however, must be viewed through the lens of her funds' recent underperformance. The firm's flagship Ark Invest ETF is still 69% below its record high reached in February 2021, and that's after the ETF surged 66% from its December 2022 low.
The fund sold the bulk of its Nvidia position right before the stock went on a scorching 200% rally that was largely built on investor excitement surrounding artificial intelligence. Since the launch of Ark's flagship fund in 2014, it has significantly underperformed the Nasdaq 100, delivering a gain of 144% compared to the Nasdaq's gain of 278%.