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Ark Invest is once again betting on Elon Musk by buying a private stake in Twitter for its new venture capital fund.
That means investors still have an avenue to gain exposure to the privately-held company under Musk's leadership, though the exposure is diluted with other holdings and the associated fund fees are very high.
Ark has so far purchased a $1 million stake in Twitter, and hopes to increase its position over time as its Venture Capital fund grows in size. The social media platform currently makes up about 12% of the fund and is its top holding, after cash and cash equivalents.
"Elon Musk is our renaissance man, or our Thomas Edison perhaps," Cathie Wood told Bloomberg on Wednesday, adding that his drive to solve big problems has helped him attract some of the world's best engineers.
Ark previously owned Twitter in its flagship ETF, but ultimately sold that position in February, about two months before Musk launched a $44 billion bid for the company.
As for the potential upside, Wood believes the social media platform could be better monetized via subscription services, digital wallet capabilities, and a revival of Vine, Twitter's short-form video product that was a precursor to TikTok.
Wood said what's important is Musk understands the importance of vertical integration, given his experience in building out Tesla and SpaceX, and that means Twitter could ultimately be built into a successful "Super App."
A super app is a one-stop app that includes everything from messaging, to payments, to news, to social media, and while it has never taken off in the US, it is very popular in Asian countries like China and South Korea.
"He and Jack Dorsey working together I think could turn this into a super app. I think they have a good shot," Wood told Bloomberg.
Ark outlined its investment thesis on Twitter in a short blog post earlier this week.
"Adding creator-focused WeChat-like 'super-app' features could expand its business into direct monetization channels that will diversify and drive significant revenue growth. If Twitter were to roll out payments and other financial services, for example, the app could be transformed into a digital wallet," Ark said.
As for an exit strategy, reports have suggested that Musk ultimately plans to bring Twitter public again after he institutes various changes to the platform. That potential IPO could come in as little as three years, but until then, investors can grab a piece of small piece of Twitter via the Ark Venture fund.
However, there are some big limitations in purchasing the fund. For one, the Ark Venture fund is an interval fund which means investors can only pull out money one day per quarter, and just 5% Ark's total NAV can be redeemed during the quarterly redemption window. Finally, the fund charges a fee of 4.22%, which can seriously eat into returns over time.
Since its launch in late September, the Ark Venture fund has attracted just over $8 million in assets under management.
