00:00Today we're taking a closer look at a series of unusual multi-billion dollar flows that have rippled through the
00:06ETF market in the past week
00:07suggesting some major investors use a contentious method to get exposure to that SpaceX IPO. Bloomberg's Danitza Sekova who has
00:16been
00:16reporting out on this story joins us now to explain. And specifically we're talking about the ARK Innovation ETF ticker
00:24ARKK here.
00:25And this is something we've seen before this pattern of flows ahead of some hot IPOs. This time around walk
00:32us through exactly what this potential trade was.
00:34This time it was one of the biggest one. We saw 4.6 billion get into the ARK funds and
00:41just a day later more than 6 billion got out.
00:44So the theory behind this of course we can never know what exactly happens is that investors are buying in
00:49hoping that the fund is going to get exposure to the IPO which eventually happened.
00:54And then they sell afterwards. Of course this is done through creation and redemption. So potentially you benefit from the
01:02pop in NAV that happens.
01:04And also there are a few things you have to meet. The fund has to buy the stock. The stock
01:09has to go up. And the NAV shouldn't be too crazy expensive going into this.
01:15So there are many prerequisites. But in the end it could be pretty profitable trade. And obviously the first day
01:20of trading of SpaceX was quite lucrative.
01:23And it worked quite well for some investors. Right. Even as the stock is down for a third day today.
01:27You pointed out some conditions.
01:29Those sounds like they're going to be risks for the strategy overall. There are definitely quite a few risks. And
01:34we saw that happen in the past.
01:35So we've seen similar floors for example for ARK. We saw it on the bullish IPO and the Klarna IPO.
01:41And you know the theory is that they're going to
01:43they're going to get share of the company. But that doesn't always happen. It didn't happen for Klarna. I mean
01:49you can guess with Elon Musk and the
01:52relationship they have. This was I guess kind of an easier guess. We saw another fund Ron Barron's fund Ron
01:58B that got exposure before.
02:00Then they increased the exposure. And we saw a similar trade there. But we actually saw one fund blocking the
02:06creations for that same reason.
02:09It's XOVR. And they said it's a really big hit for their actual long standing shareholders. And they say they
02:16turn around 1 billion of inflows.
02:19That was going to be around this IPO arbitrage. Which is fascinating because that's not typically what you would expect
02:24from an ETF.
02:25If we were just talking about how it's really difficult to gate an ETF. But this is fascinating because we're
02:32talking about
02:33this in relation to SpaceX. You talked about Klarna other big IPOs. And it seems like you know when you
02:39do see more of these big
02:41superstars in the pipeline come out into the public markets potentially we could see this pattern again. For sure. And
02:48those flows are
02:49really big. We're talking about 5 billion in just one of the funds. So there is definitely a little bit
02:54of like oh are clearly there
02:56is an institutional taste to it. If we're doing at those volume clearly it's spending across different ETFs. It's no
03:01longer it's
03:02kind of the arc trade. Now we're seeing a lot of other ETFs that have like private and public and
03:07that trade growing. And we had an
03:09interesting response from Kathy. She said if people time it well then they do it. It's ETF. That's part of
03:15the trade. So we're yet to see how
03:16people react. It's an interesting topic. Do you block it? Do you just accept it? I don't know.
03:21Kathy would just accept it. She's like move on. God bless.
03:23Go ahead.
03:24All right.
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