Soon after FTX’s liquidity problems were made public and Coinbase said it had “little exposure” to the problematic trading platform.
The Cathie Wood-led Ark Investments has increased its Coinbase stock holdings amid the turmoil on the FTX and cryptocurrency markets by purchasing 237,675 Coinbase shares on November 9 for about $12.1 million.
Ark Investment Management added 207,527 shares to its ARK Innovation exchange-traded fund (ETF) (ARKK), 22,416 shares to its ARK Next Generation Internet ETF (ARKW), and an additional 7,732 shares to its ARK Fintech Innovation ETF from the 237,675 Coinbase shares.
The tech-focused investment company made the purchase after Coinbase claimed it had “minimal exposure” to the currently cash-strapped cryptocurrency trading platform with only $15 million on deposit to “facilitate business operations and customer trades” in response to FTX’s liquidity crisis.
Additionally, Coinbase stated that it has no exposure to FTX Token, the native token of FTX (FTT $2.73).— which has dropped 84.08% since Binance declared late on Nov. 7 that it had decided to sell all of its FTT holdings — and its trading partner Alameda Research in response to the FTX scandal, Coinbase’s share price dropped 10.84% on November 8, which was to be expected, according to Owen Lau, a stock analyst at investment banking firm Oppenheimer:
“While COIN has minimal exposure to FTX, before there is enough evidence that the contagion risk is contained, the pressure on crypto prices will likely weigh on COIN.”
It was also the investment company’s first trade for Coinbase since it sold over 1.4 million of its shares on July 26, 2022, for a total of $75 million. The shares were distributed among ARKK, ARKF, and ARKW.
The significant sell-off followed the SEC of the United States opening an inquiry into claims that Coinbase had engaged in insider trading of unregistered securities.
However, Wood’s most recent buying binge has increased the company’s Coinbase share count back to 7.625 million, which is about one million shares less than its July 20 peak of 8.675 million shares, per Cathie’s Ark data.
ARKK, Ark’s primary investment fund, currently includes Coinbase as its eleventh-largest asset, accounting for 3.79% of the portfolio. According to Yahoo Finance, Coinbase’s stock rose 10.74% on Thursday, bringing its share price to $50.92.On Nov. 10, Coinbase announced that the company would be laying off 60 employees.
“If we see that there is going to be further depressed revenue, and if we believe this is going to impact beyond the scenarios we have already planned for, we will have to take further cost-saving action.”