Ark Investment ETF Adds SPAC Led By Chamath Palihapitiya Ahead Of Opendoor Merger

One of the top performing ETFs of 2020 is adding a special purpose acquisition company before it finalizes a merger.

What Happened: On Monday, the Ark Next Generation Internet ETF (NYSE: ARKW) took a small stake in Social Capital Hedosophia II (NYSE: IPOB), a SPAC led by Chamath Palihapitiya.

Social Capital Hedosophia II is set to merge with Opendoor at a $4.8-billion valuation. The deal values Opendoor at 1x 2019 revenue of $4.7 billion and 0.5x 2023 estimated revenue of $9.8 billion.

The ETF purchased 54,456 shares of IPOB for more than $910,000.

Why It’s Important: Ark Investment Management has had an impressive 2020 so far, with three of the 10 top-performing ETFs.

The Ark Next Generation Internet ETF is up 87.3% in 2020. The ETF has gained 199% and 460% over three and five years, respectively. 

The stake in Social Capital Hedosophia II makes up only .04% of the ETF. The ETF only holds 30-50 companies on average, with 49 holdings as of Monday.

The lowest stake held in the ETF prior to this investment was $10.5 million.

The Ark Next Generation Internet ETF is a large holder in Tesla Inc (NASDAQ: TSLA). Ark CEO and CIO Catherine Wood has been a vocal Tesla bull.

Tesla makes up 10.9% of this ETF and is a top holding in the other Ark ETFs.

Roku Inc (NASDAQ: ROKU), Square Inc. (NYSE: SQ), Zillow Group Inc (NASDAQ: Z), and Facebook Inc (NASDAQ: FB) round out the ETF's top five holdings. 

Benzinga’s Take: A prominent ETF investing in a SPAC prior to a merger shows some faith in SPACs. 

In June, the Ark Next Generation Internet ETF had a median cap of $31 billion and a weighted average market cap of $156 billion. This company falls well below those ranges, so Wood is seeing room for growth. 

’s worth noting that Opendoor rival Zillow is the fourth-largest holding in the ETF, representing 3.5% of the fund.

Holding both companies is a bet on a future shift to online homebuying. 

IPOB Price Action: Shares of Social Capital Hedosophia II were trading 4.34% higher to $17.44. 

Disclosure: this author author holds shares of IPOB. 

Photo courtesy of Opendoor.