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Every great investor has a different favorite sector, but two things they have in common are great vision and timing. Not that they win every time, but more often than not, their instincts prove correct in the long run. With that in mind, Cathie Wood’s recent purchase of five million shares of Archer Aviation takes on a different meaning now that the company has announced a reverse stock split.
Cathie Wood, Executive Director ARK Investhas always had a reputation for aggressive business in the technology sector. So when it bought five million shares of vertical takeoff and landing (VTOL) company Archer Aviation in late 2023, it seemed like normal. At the time, Archer stock was trading below $10 per share, creating a huge advantage for traders who could buy millions of shares at once.
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Archer’s business model revolves around the development of personal flying vehicles that serve as “air taxi“move passengers from place to place much more easily than cars. It’s a concept from The Jetsons, or a 1960s television show that tries to imagine what transportation would look like in the 21st century. At the time of Wood’s purchase, which was spread over several months, there have been several positive developments at Archer.
In December, Archer partnered with Anduril, a defense contractor that makes autonomous military applications and products. Archer paired the announcement with news that it had raised an additional $340 million in capital from United Airlines and Stellantis, which own equity in Archer. It seemed all systems go for the big 2025, and then Archer announced a reverse stock split.
At the stockholders’ meeting on December 20, Archer stockholders approved a proposal to “increase the number of authorized shares of the Company’s Class A common stock available for issuance from 700,000,000 to 1,400,000,000.” The company also changed its bylaws to limit ownership, control or even investment in the company to US citizens.
That change could be related to Archer’s new partnership with Anduril. If the company is going to provide products and services under military contracts, it will likely focus heavily on the US defense industry. Having foreign ownership of a company with such a profile and client base can compromise its ability to work on top secret projects.
However, news of the stock split sent Archer’s stock price down from the $11 range to a current price of $9.75. This could provide a golden opportunity for Cathie Wood to buy even more shares. Whether she will remains to be seen, but it seems clear that she has a lot of faith in Archer Aviation’s long-term future. If you missed the opportunity to jump in when the price was below $10, you can still buy the dip before this stock recovers.
Either way, Cathie Wood and ARK Investments will come out ahead. Public records show Ark’s initial purchase of 2.5 million shares took place between October 28 and November 13, when Sagittarius was available for $3.20 and $4.20. It bought another 2.5 million shares on Dec. 13 for $7.39 a share. So even with the share price down due to the stock split, buying five million Archer shares was a winning trade for Cathie Wood.
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