Cathie Wood's ETF AUM surged and fell by 5.7 billion USD in just six days! It may be a bullish IP arbitrage trade.

The ARKK ETF's Assets Under Management are experiencing significant Fluctuation. What is heartbeat trading?

Renowned financial writer You Tinghao stated on his personal fan page that the fund ARK Innovation ETF (ARKK) managed by the female stock god Cathie Wood experienced an astonishing movement. Within just six days, the fund's Assets Under Management (AUM) surged from 7.1 billion USD to 12.8 billion USD, and then rapidly shrank back to 7.2 billion USD. This extreme fluctuation has left the market in confusion.

( Ark Cathie Wood makes a quick visit to Taiwan, stating that it is definitely a bull market now! )

Generally, the explanation refers to the common "heartbeat trade (heartbeat trade)" of ETFs, where a large amount of capital briefly flows into the ETF, causing the fund size to expand instantly. The fund then uses in-kind redemption (in-kind redemption) to return part of the assets to major investors. The effect achieved is to avoid generating taxable capital gains within the fund, effectively using this chart-like heartbeat trading method to reduce taxes.

Financial writer You Tinghao: ARKK Fluctuation may be related to Bullish IPO arbitrage trades

However, You Tinghao pointed out that the fluctuation of ARKK this time not only amounted to as high as $5.7 billion but also had an unusually short time span, far exceeding the scale of typical heartbeat trading. He believes a more reasonable explanation is related to arbitrage trading associated with the cryptocurrency exchange Bullish IPO, led on August 13 by former New York Stock Exchange president Tom Farley and supported by tech billionaire Peter Thiel.

(Bullish IPO success! ARK enters BLSH with a profit of nearly 80 million USD)

On the day of the IPO, ARK received an allocation of 2.53 million shares, of which 1.71 million shares entered ARKK. Bullish's stock price surged 83% on the first day, equivalent to an instantaneous unrealized gain of over 51 million USD for ARKK. Subsequently, ARK quickly redeemed and locked in profits, leading to a decline in AUM. The overall operation scale reached 2.9 billion USD, and within just a few days, ARK may have arbitraged over 21 million USD.

You Ting-Hao analyzed that the winners of this arbitrage are ARK and the institutions participating in the arbitrage, successfully capturing the short-term profits from the IPO. The losers are the existing ARKK investors, as the IPO dividends are diluted, and in reality, the fund's net value has not significantly benefited from the expansion of AUM.

This article discusses how Cathie Wood's ETF AUM surged and plummeted by $5.7 billion in just six days! This could be a bullish IPO arbitrage trading phenomenon first reported by Chain News ABMedia.